Reverse Mortgage Pitfalls: Truth Or Dare?
Posted on | August 26, 2008 |
Reverse mortgage pitfalls occur nearly everyday. Are you considering such a loan and if you are have you thought about the negative aspects of such a loan?
Unless you came into this world with out your eyes or ears you have most likely seen all the ads on TV, the radio and in newsprint as well.
This type of loan probably fits well for many people as I’m certain that is does but there are many caveats that you need to pay very close attention to and be aware of when considering a reverse mortgage loan.
At the time of this writing there are well over a dozen different types of the loans floating around out there with this type of concept.
Taking this into consideration, your first consideration should be to seek out lenders who offer a large number of these loans for you to consider.
Be very suspicious of any lender who will only be willing to offer you a couple of choices as these are most likely in house loan packages that are designed for the lenders self interest. These loans may not offer you the best rates and terms available elsewhere on the market.
Reverse mortgage pitfalls can be completely avoided by arming yourself will all the facts before you go shopping for one of these loans.
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 pitfall here is that the younger you are the less attractive interest rate you will get which can really hurt you down the road.
You must remember that inflation and cost of living continue to increase. Will your loan payments increase with these factors as well?
Your loan contract must stipulate a cost of living increase dictated by the local economy. If not, you must consider where you will be 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.
Property upkeep. Yet another expense factor you must not ignore! Expenses such as your plumbing costs, HVAC, roofing, flooring and a tons of other things that pop up from time to time. You must include those costs as well.
You must pay for all your housing insurance. Your lender will require up to the minute insurance coverage as they need to protect their investment. Again, make sure these costs are included.
Finally, you must continue to pay for all the related utility costs to the property. As with the inflation factor previously mentioned, what do you think you will be paying for electricity 10 years from now?
So what is the bottom line on these types of loans? Well, these are but a few of the many you should take into consideration and discuss with your lender. There are more which you can discover 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 and no. Be aware of what you are doing and this may work out beautifully for you. Remember, knowledge is power and it is up to you to empower yourself!
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