Top 10 Reverse Mortgage Disadvantages
1. One of the reverse mortgage disadvantages is the complexity that some of these loans can involve. Some of these mortgages can be very complex, and difficult for most consumers to understand the fine print involved.
2. Having a reverse mortgage explained can point out that the money you receive must be paid back with interest. As long as you live in the home and keep up the maintenance and taxes then no payments are expected, but if the home is sold or you move out the loan principal plus interest will be payable.
3. Reverse mortgage disadvantages include the fact that this step lowers the equity that you have in your home. If this equity is needed at a later time you will not have it available.
4. Some reverse mortgage lenders attempt to sell you other products as well, often with the proceeds from the reverse mortgage. If you are offered other products from the lender get independent advice before buying anything.
5. Another of the reverse mortgage disadvantages is that you must have a significant amount of equity built up. These loans are not intended if you only have a few thousand dollars in equity, so many individuals who need the funds may not be eligible.
6. The reverse mortgage requirements only allow you to take out this type of mortgage if you are at least sixty two years old. For individuals who are close to this age but have not reached it yet this can pose a problem.
7. The number of scams out there regarding reverse mortgages can be intimidating. Many consumers have been victims to bait and switch, or other unethical practices. Caution must be used in choosing the right lender.
8. Higher interest rates are often one of the reverse mortgage disadvantages. Because you make no payments until you sell the home, move out, or pass away the lender must wait to recover both the principal and accumulated interest. A higher rate is usually charged because of this.
9. When it comes to the reverse mortgages pros and cons one of the cons is that you will usually pay higher closing costs and fees with these mortgages, as well as the higher interest rates. In some cases you may pay ten or fifteen thousand out of your home equity to cover these costs.
10. One of the most concerning reverse mortgage disadvantages is that in some situations you could end up losing your home. While the lender would rather have the money, if you fail to maintain the value of the home through repairs, or must be hospitalized for more than a year, your payment could become due immediately.