Disadvantages of a Reverse Mortgage

There are advantages and disadvantages to reverse mortgages. A reverse mortgage can get you the money you need now while providing a more comfortable retirement. This is because you do not have to repay the reverse mortgage until you no longer live in your home. But before diving in to a reverse mortgage, persons over the age of 62 who qualify need to take into account the disadvantages of a reverse mortgage as well as the advantages. Below is a list of things you should consider before obtaining a reverse mortgage.

1. Only choose HUD approved reverse mortgage lenders. One of the disadvantages of a reverse mortgage is that some unscrupulous lenders take advantage of elders by charging larger than normal up-front fees.
2. Consider a home equity loan first. If you can qualify for a home equity loan, and can afford to immediately begin to pay back the loan, you could get more money out of your home and have a more traditional loan that gets smaller every month instead of growing larger over time, as with a reverse mortgage. Even though you do not have to repay the reverse mortgage until death or until you permanently move away, by the time this happens you could owe far more than you borrowed due to accruing interest. However, you will never owe more than the value of your home.
3. There are different kinds of reverse mortgages. A federally insured (HUD) reverse mortgage is referred to as a Home Equity Conversion Mortgage (HECM). But there are other kinds of reverse mortgage such as a proprietary reverse mortgages. Fannie Mae also offers a reverse mortgage, called The Homekeeper that costs less than a HUD reverse mortgage. For homes with values over $500,000, The Private Cash account reverse mortgage is usually chosen. One disadvantage of this reverse mortgage is that it comes with higher closing costs; however, it does offer flexible payment choices and a rising credit line.

These considerations will help you to be informed and better prepared about reverse mortgages before you get one. The main disadvantage of a reverse mortgage includes higher than normal origination fees and closing costs, possible additional lender’s service fees during the life of the loan, increasing debt due to the accumulation of interest, loss of equity, and the cash on hand from the reverse mortgage could affect Medicaid eligibility.

Before entering into any mortgage, talk to a professional about the advantages and disadvantages of a reverse mortgage to see if it is a good choice for you.

Reverse Mortgage Help:

• Reverse Mortgage Pros and Cons

• What is a Reverse Mortgage

• Reverse Mortgages - How They Work

• Reverse Mortgage for Seniors

• Disadvantages of a Reverse Mortgage

• Reverse Mortgages Requirements