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Looking at reverse mortgages' pros and cons can give you a good idea of whether you want to pursue this type of loan. Reverse mortgages can provide you with a number of advantages as a homeowner. Here are some of the pros and cons that you need to know about reverse mortgages.
One of the biggest advantages of getting this type of loan is that you can create a regular source of income for yourself during your retirement years. If your retirement savings are not what they should be, this can be a good way to make up for that. The lender is going to be able to make regular payments to you until the equity in your home is exhausted.
Another advantage of this type of loan is that you could utilize a line of credit if you do not want to receive regular payments. In fact, you could combine receiving payments with a line of credit if this suits your needs best. This makes the reverse mortgage one of the most flexible loans in the industry.
Another big advantage with the reverse mortgage is that you do not have to worry about paying it back in the future. No payments are going to be required on your part. The loan is not going to be repaid until you sell the house or until you and, if you are married, your spouse pass away. This means that you potentially would not have to worry about paying back the loan in your lifetime. You can live in your house as long as you want without ever having to start making payments.
With this type of loan, you also will not have to meet any credit or income requirements. Since you do not need to be able to repay the lender, they do not care if you make any money or have a good credit score.
One of the disadvantages of this type of loan is that not everyone is going to be eligible. In order to get a reverse mortgage, you are going to have to be at least 62 years old. This also applies to your spouse if you are married. In addition to meeting the age requirement, you are going to have to have a house that is paid off or have a very small mortgage balance. You also have to be dealing with your primary residence instead of a vacation or rental property.
Another problem with this type of mortgage is that it can severely affect the amount of inheritance that you are able to leave your beneficiaries. By using this program, you are going to essentially be spending your equity while you are still alive. When you pass away, your children are going to have to use life insurance money to pay off the loan or sell your house. Either way, this is going to cut down on the amount of inheritance that they receive.
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