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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.
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 action should be to only do business with a lender who will offer you multiple choices for this type of loan package.
Be very wary of lenders who will only offer you two or three choices as most likely these are in house packages that are self centered with your lender and may not offer you the best terms that you will find with lenders offering you a bigger selection of loan packages.
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 pitfall here is that the younger you are the less attractive interest rate you will get which can really hurt you 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?
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.
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.
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?
So what is the bottom line? These are but a few of the pitfalls you need to consider when talking with your lender. There are many more and you can 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 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!