Reverse mortgages have been shrouded in controversy for years. A reverse mortgage is a special type of home loan, secured against a residential property, but does not require homeowners to make loan payments. Instead, loan payments become payable when a homeowner dies, moves away permanently, or sells the home.
While there are situations where reverse mortgage might be a good solution, there are times when people should refrain from them completely.
Planning to leave Heir’s Some Inheritance
Homeowners should not take a reverse mortgage if they wish to leave heirs some inheritance. Upon death, the heirs will have to pay down the entire mortgage loan to retain the house. Upon selling the house, heirs would only be left with whatever is left upon paying down the mortgage loan. Should the home sell for less, they receive nothing.
When living With Someone
People should never take reverse mortgage if they live with other people, i.e., relatives roommates or friends. By law, those left behind upon the homeowner’s death would have to vacate if they are not able to pay the full amount of the reverse mortgage loan.
Likewise, those who live in the house might have to vacate on the homeowner moving out of the house for more than one year. A reverse mortgage requires a borrower to live in the house as the primary residence.
Any person considering taking a reverse mortgage should be of sound health. These types of mortgages require people to be healthy enough to live in the house for 12 consecutive months. If a homeowner becomes sick and is relocated to a healthcare facility where they stay for more than one year, they risk losing the house. A reverse mortgage requires homeowners to stay in the house as the primary residence.
Planning To Move Soon
If you are planning to move soon, be it to another state or house, then a reverse mortgage might not be a good idea. Homeowners who vacate their home or sell them are usually given not more than six months to settle their reverse mortgage loan.
The costs of sustaining a reverse mortgage at times are quite high. For instance, reverse mortgage costs might be insufficient to cover property taxes, let alone homeowner’s insurance premiums and home maintenance costs.