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.
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.
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.
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.
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 pitfalls need not to even occur if you are armed with the fact before seeking 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.
Inflation! This ugly fact will never go away. As the cost of living increases 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.
Home owners insurance. Another things you must keep in mind. Your lender will require up to date insurance as they must protect their future investment. Again, you must included this into your overall income figures.
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?
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.
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!