Reverse Mortgage Pitfalls: Information You Must Know!

Reverse mortgage pitfalls are very real and is something you need to take very seriously when considering this type of loan.

Unless God forgot your eyes and ears at birth, you have undoubtedly seen all the ads everywhere from your television set to your local newspaper.

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.

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 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.

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 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 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?

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.

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.

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.

Take all your cost you expect to pay over the next 10 to 15 years and make sure the contract you agree to will adjust upwards as these costs increase. The power of your dollar today should have the same power 10 years 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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