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Reverse Mortgage Loans - Pros and Cons
Imagine getting a mortgage loan and never having to make a payment. That's exactly what happens when you get a Reverse Mortgage Loan. You receive a sum of cash based on the equity in your home, and then payment isn't due until you no longer use the home as your main residence. Once you--or your heirs--sell the property, the money from the sale is used to pay off the loan. It sounds too good to be true, but there are a few things you should be wary about. Here are the pros and cons:
These are the Best of the Best:
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When applying for a bad credit mortgage loan, make sure you are current on your existing credit lines. You will want your current credit to be as good as possible.
Also, make sure to include all the income you have. If you have any equity in any stocks or other financial accounts, make sure to mention that to the broker as well.
The more money you can put down on the loan, the more likely it is that you can get approved. FHA loans usually only require 3-5% down. They are also usually open to working with people with credit problems.
PRO: You never have to worry about making payments. Instead, money from the sale of your house is used to pay off the loan. As long as you live in the house, you never have to make a payment.
CON: You must keep current with taxes and insurance. And because the equity gradually decreases, you could end up with almost nothing by the time you move out.
PRO: The eligibility criteria are relatively simple. You must be the homeowner, and it must be your principle residence. You can't, for example, get a Reverse Mortgage on an investment or vacation property.
CON: You must be 62 or older. That's one of the reasons these types of loans appeal to retired seniors seeking supplemental income.
PRO: Your home can never be taken by the lender. With most mortgages or home equity loans, the lender can repossess your home if you fail to make payments in a timely manner. With a Reverse Mortgage, as long as you're living in your home, it belongs to you.
CON: Since the cash from your home sale pays off the Reverse Mortgage loan, you may have nothing to leave your heirs after the loan is paid off.
PRO: You can receive the cash from the loan in a variety of ways, including regular monthly payments, a line of credit, or a combination of those two.
CON: Fees tend to be high, and you don't get the same tax advantages that you receive from other types of mortgages or home equity loans.
For folks in the right circumstances, a Reverse Mortgage can help boost income and provide money for home repairs or remodeling. But before you sign on the dotted line, be sure to carefully weigh the pros and cons.
Our Recommended Reverse Mortgage Lenders:
These are the Best of the Best:
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The average rate of interest on mortgage loans continues to fall and has been under 5 percent for almost all of this past year, with this recent round of rate cuts seen as the lowest for borrowers in years. The reason, many borrowers today have bad or at least less than perfect credit scores. Still a borrower with less then perfect credit an jump through a few hoops and get a fairly decen rate on a loan.
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