Top 5 Disadvantages Of A Reverse Mortgage Get The Facts!
Learn the top 5 disadvantages of a reverse mortgage. Funding your retirement with a loan based on your home's equity sounds great, but reverse mortgages aren't for everyone.
Many borrowers have been too trusting and have fallen prey to a reverse mortgage scam which could have been easily avoided had they exercise good old-fashioned curiosity and studied the facts first.
Top 5 Disadvantages of a Reverse Mortgage
Here are the five reverse mortgage disadvantages as pointed out by financial experts. Knowing them well can save you a lot of future problems.
1. You Pay Higher Reverse Mortgage Cost
Compared to a conventional mortgage plan, a reverse mortgage is loaded with substantial reverse mortgage fees that you have to shoulder. These include charges for the inspection and appraisal of your property, preparation of credit reports, and many other fees that seem to crop up every step of the way.
You may have to pay them as they come-which could be a problem if you're strapped for cash in the first place. You can have them deducted from the loan's proceeds, but that will deprive you of a chunk of cash which you could put to better use in your old age.
2. It Reduces The Value Of Your Home When You Put It Up For Sale
Contrary to the claims of reverse mortgage companies, a reverse mortgage cannot guarantee a lifetime of income because the home would eventually be put up for sale after the borrower's death. When that happens, the reverse mortgage will have to be paid from the proceeds, and it could greatly diminish the inheritance of the surviving family.
3. It Limits Your Credit Flexibility
During the duration of the reverse mortgage, the borrower's ability to generate other sources of financing will be curtailed or greatly diminished. This is probably the most serious of the top five disadvantages of a reverse mortgage.
With your property tied up, it will be difficult to tap new sources of funds such as personal loans, car loans, and even credit cards.
4. Senior Citizens May Be Unable To Manage The Proceeds Wisely
Let's face it-elderly borrowers may not be as sharp and prudent in managing their money as they were when they were younger. With a lump sum in hand, it's tempting to waltz off on a world cruise or make extravagant and totally unnecessary purchases. With many of our senior citizens living alone, the risk of mindless spending becomes all the more real.
5. Reverse Mortgage Is A Complex Minefield And A Misstep Could Have Life-Changing Consequences
The top 5 disadvantages of a reverse mortgage illustrate the inherent danger of the plan. The risks are magnified when you put a senior citizen borrower in the equation.
When need weighs in, however, and no other income opportunities available to a homeowner-retiree, getting a reverse mortgage must be made only after scrutinizing the full reverse mortgage cost and the plan's long-term consequences.
In this regard, getting a professional financial adviser will help in threshing out the important issues including reverse mortgage fees and the reverse mortgage disadvantages.
Only after every area of concern has been discussed can a borrower make an informed decision on a reverse mortgage agreement that could tie him or her up for life.
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