Reverse mortgage pitfalls are very real and is something you need to take very seriously when considering this type of loan.
Unless you were born missing your eyes and ears you have probably seen the countless ads on TV and in print as - well as listening to the pitches showering your ears from the radio.
These types of loan can fit will for many people as I am sure they do in certain circumstances but there are many caveats that you must be aware of and pay close attention to if you are considering a reverse type of loan.
There are well over a dozen types of reverse type loan concepts floating around out there at the time of this writing.
Your first action should be to only do business with a lender who will offer you multiple choices for this type of loan package.
If the lender you talk to only offers you a couple of different types of loan packages you need to be very wary as these types of loans are probably designed by the lender themselves and may not offer you the best rates and terms you can find shopping around.
Once you arm yourself with the facts before you go shopping, reverse mortgage pitfalls need not even occur.
Reverse mortgage loans are usually structured around a couple basic requirements. The first and foremost is your age. HUD for instance requires you to be 62 while the more conventional market will make loans to younger groups.
The major pitfall here is that the younger your age when the loan is made, the less interest you will be offered on that loan. This can have major consequences for you down the road.
The inflation factor. It will never go away so as the cost of living expenses grow year after year will your loan payment increase as well?
Your reverse mortgage contract must include some sort of cost of living adjustment. If it doesn’t where do you think your income will put you 10 years from now?
Another reverse mortgage pitfall is that you must be aware that you are required to pay all the yearly taxes on your property. Make sure you figure that into your yearly income as from these loans well.
You must also pay for all the upkeep on your property. Expenses such as HVAC, roofing, plumbing and a myriad of other household expenses need to be included.
Home owners insurance. Another things you must keep in mind. Your lender will require up to date insurance as they must protect their future investment. Again, you must included this into your overall income figures.
Last but not even close to least is your utility costs. They will continue to rise as previously mentioned in the inflation factor. How much to you think you will be paying on your electric bill a decade from now?
The bottom line? These are just a few of the things you need to consider and talk over with your lender. There are more and you will find these online if you know where to look.
Add up all the costs you will be expected to pay over the course of the next 10 to 15 years and make sure your contract adjusts upward so the power you have in one dollar today is reflected with that same power a decade from now.
Reverse mortgage pitfalls? Yes but certainly not always. Depending on how you structure you loan it could work out beautifully for you in the end. It all depends on how much knowledge you are bringing to the table and remember that knowledge equals power and only you decide how much power you will bring to that table!