Reverse Mortgage Pitfalls: Truth Or Dare?

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.

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.

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.

Most often these types of loans are structured around a few basic requirements starting with your age. As an example, HUD requires you to be 62 while more conventional lenders will be willing to loan to younger people.

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 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.

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.

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 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!