by Barry Crewse
Reverse mortgage pitfalls are very real and is something you need to take very seriously when considering this type of 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.
There are many loan programs, over a dozen at the time of this writing, that are designed around the reverse mortgage 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 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 main pitfall with this one is that the younger you are when the loan is made, the less interest you will be offered which can have dire consequences 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? Maybe yes, maybe no. It all depends on how you structure you loan and the knowledge you have about it when that loan is created. Keep in mind that knowledge is power and only you decided how much power you will take to the table!
