Reverse Mortgage Pitfalls: Are You Prepared For The Worst?
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?
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.
Although this type of loan may fit well for many people, and I am sure that it does, there are many caveats that you need to be aware of and pay close attention to when seriously entertaining 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.
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.
Once you arm yourself with the facts before you go shopping, reverse mortgage pitfalls need not even occur.
These loans are structured around basic requirements which start with your age. For instance HUD requires you to be 62 years of age while more conventional lenders will offer you a loan at younger ages.
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.
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.
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? 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 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? 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!
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