Loan Modification vs Reverse Mortgage | South River Mortgage

Joan is a 75-year-old who had some unexpected medical bills come up. Since these additional expenses, Joan hasn’t paid her mortgage payment for the past couple of months. Due to these circumstances, her lender offered her a loan modification. She knows it might not be in her best interest long-term but she’s unsure of her options and doesn’t want to lose her home. Joan’s situation isn’t uncommon.  

Unexpected bills do come up and sometimes there aren’t any funds saved for a rainy day. If you are in the same boat as Joan, you should consider your options. A loan modification changes the terms of your loan to make your mortgage payments more affordable but can extend the terms of your loan or affect your interest rate. Meanwhile, a reverse mortgage is a mortgage that enables you to access equity from your home to supplement your income so you can pay off your existing mortgage.  

Once you retire, normally you are on a fixed income and sometimes a loan modification won’t provide enough relief to live the life you want in retirement. In a loan modification, you are still required to make monthly mortgage payments. If Joan were to have any more unexpected bills come up and she couldn’t make her reduced monthly mortgage payment, her credit score would go down and she could possibly be facing foreclosure.  

On the other hand, in a reverse mortgage, it is completely up to you if you choose to make monthly mortgage payments. If Joan were to have another emergency and couldn’t make her mortgage payment that month, her credit score wouldn’t be affected – in fact, she wouldn’t face any penalties at all.  

In a reverse mortgage, payment is due only when you permanently leave your home. Since you still own the home, you will continue to make property tax and homeowner’s insurance payments, similar to how you would today. A reverse mortgage gives you the financial stability to pay unexpected bills, settle outstanding debts, or afford much-needed home repairs. 

At South River Mortgage we know it can be tough to plan for the unexpected. We specialize in understanding your unique situation and helping you understand your options. Give us a call today.

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