The idea of Reverse mortgage basically is- converting your equity in your home into an income flow, until you and your spouse are no longer, or have moved out the house.
During this time period you make no mortgage payments. But interest accrues on all the amounts you have taken out. At the end if you did not pay off the loan balance bank takes possession, and title of the house attempting to satisfy your reverse mortgage loan that they let you have. In this situation you or your heirs are not liable for the remaining debt.
Is reverse mortgage suits for everyone? Absolutely not. I am not a certified specialist to advise you. You need to talk with a reverse mortgage professional and let them explain to you all the details of reverse products and programs. Before you jump into decisions, digest the details and make a wise decision.
What are the negatives of reverse mortgage. Here are the seven negatives that come to my mind:
It is an expensive proposition, the fees and interest rates to be ridiculously high. If you do not need the money to meet your monthly expenses (like food, utilitie, medicine etc,) getting into a reverse mortgage obligation is not the right thing.
The equity that you had in your house will become smaller and smaller due to interest and fees charged by the bank.
Your reverse mortgage loan can be in default if you did not keep with the payments for property taxes, insurance payments, repairs, etc.
Your heirs, like children and grandchildren, who may be looking forward to you giving money to them as part of inheritance can be in some cases disappointed.
Subsequent to your death, your reverse mortgage lender will take over the property unless the heirs of the estate take steps to satisfy the debt in full.
Your loan balance will snowball to become larger and larger from monthly interest charges being added over the years.
There will be the tendency to draw money from your reverse mortgage available loan balance for unnecessary travel and other non-emergency items.
Don't leap on the reverse mortgage vehicle without bearing in mind how a reverse mortgage loan may impact the overall finances.