Reverse mortgages are types of loans where borrowers can take a small portion of their house equity and convert it for a sum that they can borrow. The usual mortgages that we know of involve borrowers having to pay monthly installments in order to clear off their debt.

In contrast to this, a reverse mortgage involves lenders paying monthly installments to the borrowers, thereby increasing the debt as time goes by. This loan is typically settled if the borrower decides to sell the house involved in the reverse mortgage and pay the loan back with that money. Let us examine the basics of a reverse mortgage by looking at the pros and cons of it:

Pros

• No obligation on early repayment
  Unless the borrower decides to sell the house, relocates to another place, or passes away, payments are not needed. You are not obligated to pay the financial institution anything before any of these happens, allowing you to not have to scramble for money during your golden or platinum days. This is one of the major advantages of a reverse mortgage that suits the borrowers.
• Simple access to money
  A reverse mortgage is beneficial mostly for senior citizens who do not have a regular source of income. This mortgage is only available to those who are above the age of 62 as they may be in dire of the funds due to not having a regular source of income. A reverse mortgage may thus be the ideal solution for them as it is a simple way to get emergency funds from an asset that one already has.
• Non-taxed funds
  The best part about the payouts of a reverse mortgage is that the borrower does not have to pay any taxes on them. This is really good news for anyone taking out a reverse mortgage for an urgent need or an emergency.

Cons

• Age criteria
  The age limit for getting a reverse mortgage is that the borrower has to be at least 62 years of age. This means that if the individual is below the age of 62 years, they are not eligible for a reverse mortgage and have to find alternatives through other loans. This is an important fact to consider when understanding the basics of a reverse mortgage.
• Loss of inheritance
  One major disadvantage of a reverse mortgage is that you cannot pass your house on to the next generation. This means that your children and grandchildren will never own the house you once owned. This might be emotionally distressing for some. For those having a sentimental attachment to their homes, a reverse mortgage is probably a bad choice and needs to be reconsidered. However, if your heirs can pay off the reverse mortgage loan another way, they may keep the house.
• Strict conditions
  The borrower cannot afford to miss out on the payments of their property taxes and insurance money. This is because defaulting on these can see the borrower risk losing their home. If keeping up with regular bills such as these is a problem, you might want to rethink if a reverse mortgage is good for you or not.