Cindy’s Other Blog

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 plan of action should be to seek out only those lenders who are offering a large selection of these types of 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 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.

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 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.

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!