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?
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 plan of action should be to seek out only those lenders who are offering a large selection of these types of loans for you to consider.
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.
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 very serious reverse mortgage pitfall may come in the form of property taxes. Yes, you the home owner must pay these year after year. Have you figured those into your income calculations a decade from now?
Keeping up your property. Yes, the lenders will require this. Expenses such as roofing, heating, air conditioning, plumbing and on and on will pop up from time to time and you need to factor in these costs over the years as well.
Your home owners insurance payments. Your lender will require that you keep up to date insurance on your property as they need to protect their investment. Have you included those costs into your future income forecast?
Lastly but far from least in your current utility costs. How much to you think you will be paying 10 years from now. They will continue to increase as previously mention in the inflation factor I discussed earlier.
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 your expenses you will pay over the next decade and make sure these factors are included in any type of loan contract you agree to. The buying power you have today should be the same buying power you have 10 or 15 years down the road.
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!
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