What makes a reverse mortgage unique compared to a traditional mortgage is that you don’t have to make monthly payments as long as you make sure to pay property taxes, homeowners insurance, and maintenance expenses to avoid foreclosure. Instead of having to pay a required amount each month until the loan is paid off, you have the option to decide if you want to make payments or not. While that is a wonderful benefit, some people prefer to pay off their loan as soon as possible. Although there are some advantages to doing this, there can also be some downsides. Ultimately the decision is up to you, but if you find yourself asking this question, feel free to consider the following factors.
Look at Your Financial Situation
The first factor that you should look at when deciding if you want to pay off your reverse mortgage early is to look at your financial situation. It is in your best interest to sit down and really think about what your finances look like now and how they may change in the future. If you believe that you are at a good spot, then your decision will be easy. However, if you don’t think that you are stable with your finances, you may want to reevaluate the options. If you look at your finances but are still unsure, here are some pros and cons that may come from paying off your reverse mortgage early.
Pros to Paying Early
One of the main benefits of paying off your reverse mortgage loan early is that you won’t have to worry about prepayment penalties. What this means is that you won’t have any added problems if you decide to pay off your loan early. Another benefit that comes from paying off your loan early is that you will be able to leave your house to your loved ones completely clear or only with a smaller debt than initially. This not only benefits you but also your family because they won’t have to worry about such a financial burden when you are out of your house.
Cons of Paying Off the Loan Early
Although it seems strange to let a loan accrue interest, it’s very common for people to delay payments for their reverse mortgage until it comes due. The main issue that will arise from making early payments is that you won’t have as much money in the short term. If you were ever faced with some sort of emergency, medical or otherwise, you may not have the funds needed to pay for any expenses that may stem from that situation. Related to this, you may not be able to pay for any types of home repairs or car repairs if you decide to start paying off your loan early. As counterintuitive as it sounds, deferring payment until later may help you in the long run.
A perk of the reverse mortgage loan is the flexibility when it comes to the money you receive. You have the option to do what you want with your money. Whether or not you decide to pay off your loan early, it is important to remember that you are still responsible for paying your property taxes, homeowners’ insurance, and home maintenance costs to avoid foreclosure. If you do want to start paying back your reverse mortgage loan early, check out this article that discusses the payment options available to you.