Here are the top three reverse mortgage pitfalls to lookout for. You need to be aware of some dangers.
1) If you have to go to a hospice, nursing home or intend to live in another home and use the house as a second home the bank will call the debt due. This is definitely something you want to consider before taking out a reverse mortgage.
2) It’s easy to be lured into an adjustable rate because lower interest rates in a reverse mortgage have higher monthly payments. If the interest rate increases your payment decreases, as does the time frame you have to draw on the mortgage. But adjustable interest rates are a gamble and Las Vegas wasn’t built on winners.
A considerable downside to reverse mortgages is the high up front costs. This cost can be compensated by a lower interest rate over time, but some seniors choose other options to draw on their home equity. Some reverse mortgage closing costs s are negotiable, e.g the origination fee, and you should be able to work with them on these costs.-
3) Most of the time you will be shown the monthly amount you will receive each month BEFORE the escrows are taken out. This means that you could sign up expecting to get $900 per month and only receive around $700. Make sure you are given the monthly payment LESS your escrow payment. Like most mortgages you will usually be given the option to escrow or not to escrow, however the bank has a vested interest in your home. Meaning if you do not maintain your insurance and taxes as they deem responsible they can call the loan or force an escrow account on you.”
Many lenders also want to make sure the home is kept in good condition and you should make sure to set aside some money to take care of basic upkeep of the home. Ask the loan officer what the lenders policy is on maintenance and repair. You may want to take enough money up front to have future repairs taken care of so that your monthly payment stays the same.
Reverse Mortgages can be a very valuable tool for a seniors retirement plan, however, that is not to say they are perfect and the three things in this article are a few of the things that you should consider.
Reverse Mortgage Information 