Is A Reverse Mortgage Worth It?
We’ve heard about how great a reverse mortgage is and how simple it is for owners to convert their homes into instant cash. But is it smiles all the way? To fully understand the downside, let us first take a look at what reverse mortgage is. A reverse mortgage is essentially a loan for seniors over 62 who own a home. Unlike a traditional loan, the lender pays the borrower against the value of their home while using it as collateral. The interest set by the lender could be either fixed or variable through the tenure of the reverse mortgage. These payments can be disbursed as a lump sum, a line of credit, or monthly payments for a specified duration. The loan amount, along with interest accrued and other fees, needs to be paid off if the homeowner dies, permanently vacates or sells off the home. This sounds tempting for seniors who live in their own homes with no other source of income by providing them with a steady cheque every month to cover expenses. There are, however, downsides to a reverse mortgage.