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Reverse Mortgage Pitfalls: Truth Or Dare?
By Barry Crewse | August 11, 2008
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 were born missing your eyes and ears you have probably seen the countless ads on TV and in print as - well as listening to the pitches showering your ears from the radio.
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.
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.
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 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 reverse mortgage pitfall factor that you must pay close attention to is your yearly taxes. These must be payed by you, the home owner. Have you figured those costs into your income levels 10 years down the road 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?
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 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!
Topics: Finance |