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Understanding The Pros and Cons of Reverse Mortgages

Understanding The Pros and Cons of Reverse Mortgages

A reverse mortgage is entirely opposite to a home loan. You mortgage the house to the bank or a lender and in return get periodic payments. Eventually, the house is owned by a bank and they can sell it to recover the loan money along with the interest. It is for senior citizens, specifically for those who lack any constant stream of income. People over sixty are eligible for the reverse mortgage.

The ads given by reverse mortgage companies are very attractive. The ads show it as a means of great fortune. For several people, it is an excellent way of increasing their financial profile after retirement. It can have positive effects on their life quality. But it is important to look at both pros and cons of this mortgage before investing in it.

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Disadvantages of reverse mortgage:

Here are some of the drawbacks of this type of mortgage.

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  1. High fees: The upfront cost which includes insurance, closing and origination cost is very high. It is considered slightly greater than the cost that is charged for refinancing.
  2. Accumulating interests: There are no monthly payments in it, so the amount that you have to pay eventually increases. It grows over the time. With each passing month, the amount of interest increases.
  3. Not enough money to tap in: If there is a lot of home equity, it does not mean that you can use all of it. The reverse mortgage only allows you to use a limited sum of that money. The actual loan payment is calculated by using the appraised value of the home, the amount you owe on the home, current interest rates, and age.
  4. Complicated procedure: It is a mortgage, but in reverse. Some people find it difficult to understand the concept. In the traditional mortgage, money is borrowed up front and loan is paid back in installments over a period of time. It is just the opposite of that. You collect credit over time, and you pay it all back when you leave the house. Any equity that remains at the time of ownership is given to the heirs. Several people find the process complicated and difficult to understand.

Advantages of reverse mortgage:

The biggest benefit of this mortgage is that it saves you the trouble of paying traditional mortgage payments. It also eliminates the access to equity while you are still living in the house. If the circumstances are ideal, then it can the best way of earning financial security and increasing the power of spending.

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The main benefits of this type of mortgage are:

  1. Flexibility: It is highly flexible and can be utilized in several different ways. Its versatility makes it perfect for various types of borrowers. A household which is in need of finances can use the product to decrease their financial stress. Households which have stable finances can use it as a tool for future financial planning.
  2. Improving finances while staying home: The best thing about it is that it allows you to stay in your home for as long as you want. You can live in your house without making any monthly mortgage payments. You can also access a particular amount of money in case of any financial emergency. The lenders do not have any claim on your assets or income in this mortgage.
  3. No downside: With this mortgage you will only owe according to the value of your house at the time loan is paid. It is an enormous advantage because you will get the amount of money according to the value of a home that time, even if the value of the house drops afterward. This feature offers excellent financial security.
  4. Flexibility in options for payment: The options of payment depend on the type of loan you choose. You can receive the loan money in the credit line, annuity, lump sum or a combination of these three options.

Featured photo credit: www.kiplinger.com via kiplinger.com

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Last Updated on August 15, 2018

30 Fun Things You Can Do This Summer Without Spending Much

30 Fun Things You Can Do This Summer Without Spending Much

Summertime can be a real strain on your wallet. The sun is out, there are people to see, places to be; it’s no wonder you might be short of funds during these sunny months. Not everything has to cost you an arm and a leg.

Take some time to go through this list of 20 cheap summer activities and make some realistic goals to complete as many as you can.

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1. Visit a strawberry festival

Summer is prime time for tasting strawberries. More often than not, an area that grows strawberries will have a strawberry festival. Indulge yourself in strawberry pies, jams, cakes and more!

2. Have a picnic

Take your partner or your family to the local park and enjoy a relaxing picnic. Designate each person to bring one food item of their choice to add to the fun.

3. Camp in your back yard

    The summer heat can sometimes make it hard to sleep. Why not enjoy the heat outside in the yard? Pitch a tent or gaze into the night sky.

    4. Take long walks

    Discover something new where you live. Take the afternoon off from your chores and go for a long walk. You may be surprised by what you discover.

    5. Break a world record

    Breaking a world record doesn’t have to be time-consuming. You could even break one on your lunch hour. Give it a go!

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    6. Go on a bike ride

    The number of bike paths on roads in big cities has increased dramatically over the years. Take advantage, and enjoy the summer breeze.

    7. Join a gym class

      The gym is not everyone’s idea of a good time, but why not go with a friend a join a class? Spinning, yoga and step classes are always more fun with friends, and a lot of gyms allow you to pay-as-you-go.

      8. Find a new hobby

      The summer is the perfect time to find a new hobby. Serotonin (our body’s natural “happy” hormone) is produced by the sunshine and will be at a yearly high, which is great for when we want to tackle something new.

      9. Join a sports team

      Not all sports teams are competitive and require huge amounts of your time. Join in the fun with like-minded people, get fit, stay healthy and make some friends along the way.

      10. Make a slip ‘n slide

        Gather your friends, some plastic sheeting, a hose, washing up liquid if desired, and make a huge slip ‘n slide just like these guys. Granted, yours won’t be as big, but you get the idea… it’s fun!

        11. Make a treasure hunt for your kids

        Today’s digital world sees our children more often than not playing inside than outside. Why not create a sense of adventure by making a treasure hunt? Only rule? It has to be outside.

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        12. Visit a free festival

        Towns and cities are awash with free festivals, with themes from film to science. Scout your local area and discover something new.

        13. Visit the zoo

          Let’s face it: we love animals. While browsing news websites and social media networks you’re bound to come across a few pictures of cats. Take a trip to your local zoo for a better experience.

          14. Take a road trip

          Enjoy the open road with a few friends and take a road trip somewhere–anywhere. Just go out and enjoy the sunshine!

          15. Play ultimate frisbee in the park

            Frisbee is always great fun down the park, but why not turn it into more of a competitive sport by playing ultimate frisbee?

            16. Make your own ice cream

            Ice cream is a very versatile dessert. Make a sandwich, enjoy a cone, or simply just enjoy a bowl full. Better yet, making your own ice cream allows you to create any flavor you want.

            17. Invite your neighbors over for a BBQ

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              When was the last time you invited your neighbors over? Do you even know them? Now’s your chance. Just ask each person to bring a food item so costs don’t mount up for you.

              18. Get a summer job

              For many students, summer is the time for relaxation and fun. But who said earning money and being productive isn’t fun? You only get out what you put into a situation.

              19. Attend a charity event

              Attending a charity event is a great way to raise funds and awareness for a cause, meet new people, and generally have a good time. Search for your local charity event today.

              20. Visit a national park

              National parks are a great way to explore nature and learn something new. You could even volunteer and make a difference in helping restore natural habitats.

              21. Visit your local comedy club

                Local comedy clubs are extremely underrated. They are cheap to attend and no doubt you’ll have a barrel of laughs.

                22. Make your own hammock

                  Hammocks are very relaxing, are perfect for summer afternoons and are surprisingly easy to make.

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                  23. Read in your new hammock

                  Now you have your very own hammock, the only thing left to do is enjoy it. Grab your favorite book and read to your heart’s content.

                  24. Watch a movie outside

                  Movies are great. Relaxing outside in the evening is great. Put them together and you’ve got a perfect combination. In D.C, Maryland and Virginia this summer, for example, you can enjoy a huge number of movies outside.

                  25. Take a hike

                    Hikes are a great way to keep fit and see more of Mother Nature. There are countless trails available for you to explore. Why not try some this summer?

                    26. Learn how to fly a kite

                    As a child, you probably had a kite and haven’t touched it since. Why not dust it off and attempt to fly it? It’s tricky, but well worth the challenge.

                    27. Work out at the park

                    American cities are full of parks with ample space for a work out session. No doubt you’ll be happier to work out in the sun rather than a crowded gym.

                    28. Take your dog to the beach

                      One of the many joys of owning a dog is taking him or her for long walks during the summertime. This joy is enhanced when visiting the beach, for both you and your dog.

                      29. Make a summer smoothie

                      Healthy, delicious and perfect for the summer. Not only that, there are countless recipes ready for you to try.

                      30. Attend a free yoga session at the beach

                      No experience needed and all skill levels are welcome. Take yourself and a buddy down to the beach and try some yoga. You’ve got nothing to lose!

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