Reverse Mortgage Pitfalls: Are You Prepared For The Worst?
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 many loan programs, over a dozen at the time of this writing, that are designed around the reverse mortgage concept.
Your first action should be to only do business with a lender who will offer you multiple choices for this type of loan package.
Be very wary of lenders who will only offer you two or three choices as most likely these are in house packages that are self centered with your lender and may not offer you the best terms that you will find with lenders offering you a bigger selection of loan packages.
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 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?
So what is the bottom line? These are but a few of the pitfalls you need to consider when talking with your lender. There are many more and you can 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 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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