What are the benefits & potential negative impact of a reverse mortgage? A reverse mortgage is a charge upon your home and so is a “non-recourse” loan.
The primary benefit of a reverse mortgage is that it increases your income in retirement and allows you to stay in your home.
You retain ownership of your home.
It also has an impact upon the value of your Estate, as it will reduce the equity in your home, which will leave less for your beneficiaries.
You should address a Reverse Mortgage with your beneficiaries before committing to the same.
A reverse mortgage is repaid when the borrower dies, moves from the residence, or the property is sold.
A reverse mortgage increases your income in retirement. A reverse mortgage increases income, without increasing monthly payments, and allows you to stay in your home.
The reverse mortgage is repaid when the borrower dies, moves from the residence, or the property is sold.
Fees, which can include the interest rate, loan origination fee, mortgage insurance fee, valuation fee, and various other costs, are high when compared with a standard loan. Costs are normally rolled into the loan.
There is a requirement to pay back the loan, if you permanently leave the home. eg to go to a Nursing home/Retirement Village. If you need to enter a Nursing Home, the loan would become payable. Namely, the timing of the Sale will not totally be within your control and you may need to sell when the market is depressed.
A reverse mortgage impacts upon the value of your Estate, as it will reduce the equity in your home, which will leave less for your Beneficiaries.
Prior to considering a Reverse Mortgage you should speak to the major Beneficiaries of your Estate, as they may be prepared to advance funds to maintain the value of their inheritance.
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