Criticisms leveled against reverse mortgage loans
The lenders would take into account the equity built into a home when a reverse mortgage loan is sanctioned to an old person. The borrower would therefore get an amount in direct proportion to the equity built into his home. Critics point out that reverse mortgage loan results in destruction of equity at the end and would not leave any thing on the table for the heirs of the old people. As the old people are not compelled to repay the loan during their lifetime the banker would take possession of the property after their demise. The home would be disposed off in the market and proceeds would be adjusted against the dues of the old people. Millions of dollars worth of property could be squandered away in installment payments every month to the borrower. The old people who get the loans are not expected to follow any sort of financial discipline and no questions would be asked on how the money is spent.
Things you could do with reverse mortgage loans
Unlike other type of loans the lender would never question about how you utilize the funds made available to you from your reverse mortgage loans. This is a loan that you are never going to repay in your lifetime. You can enjoy life without a care and you need not care a damn about the repayment of loan. You can get the loan amount in whole if you want. If you prefer the lender to pay it in installments every month he would gladly comply with your request. This would be like a monthly income for you and you could use it for hospitalization expenses, surgeries or for an exotic holiday trip. You could use the money to go to a dream destination with your wife. A friendly feature about this loan is that interest would be charged only on the actual amount disbursed to the borrowers. Interest would not be charged on the entire loan amount sanctioned to the borrower.
Benefits of reverse mortgaging
Reverse mortgaging would come in handy for elderly people who are short of cash for their monthly expenses. They might own properties and homes but would not be getting a monthly income to pay their medical bills and grocery bills. The lenders who lend reverse mortgage loans would lend these loans to any retired person above 60 years of age. The loan would be lent against the security of the home of the aged person but he would never be asked to vacate his home during his lifetime. The most attractive feature of this type of loan is that the borrower is not expected to repay the loan during his lifetime. After the demise of the aged person or after he moves out to a old age home the property would be sold and the proceeds would be adjusted against the dues of the old person. Another attractive feature in this loan is that the loan amount along with interest would never exceed the value of the home.
Home mortgage loans
You could opt for a fixed interest mortgage loan or a mortgage loan with floating rate of interest depending upon the tenure that you choose for repayment. The interest rates are at abysmal lows now and they could move upwards in the coming years. In such a scenario the mortgage loans with a floating rate of interest would require you to pay more interest on your mortgage loans. Generally the mortgage loan lenders prefer the borrowers with good credit scores. As these borrowers repay their loans promptly the lenders naturally reward them with low interest rates. The borrowers with poor credit scores would have to pay a very high rate of interest. However, the people with poor credit scores could get a lower rate of interest if they could provide collateral securities for their mortgage loans. People who could bring in a larger percentage of margin money would be charged a lesser rate of interest.