If you want to use the equity of your house to get cash return then reverse mortgage is the best solution. So all the equity that has taken years to develop can easily turn into ash once you have completed the reverse mortgage process. Since there is no specific income required for reverse mortgage that is why you only get the money from the lender. This money is mostly lend by the credit providers who act as the lenders. In this specific loan, interest is also charged but overall the amount of loan and the added interest cannot exceed the total market value of the apartment. So even though you are living in your own apartment you do not have to pay anything to lender until the contract ends. You still have the house owner title which is why you can stay inside it. After you have either left the apartment via shifting or have died the loan that is borrowed from the lender along with interest needs to get repaid. Mostly the home is sold after they have died or their heirs keep the home by selling assets that repay the loan amount.
The possible risks of reverse mortgageThere are several reverse mortgage risks that you need to consult with finance specialist who advise you with reverse mortgage option. The risks include:
- Higher than normal interest rates for home.
- You also need to keep an eye on any sort of compound interests come along with the loan. This will surely cost you extra money than usual.
- The loan has a serious effect on the eligibility requirements for pensioners.
- After paying all the possible expenses from loan you might not be left with enough money to give yourself small scale lifestyle.
- A fixed interest rate mostly ends up in a broken agreement, which is why you need to be sure about the interests.