The Pros & Cons of a Reverse Mortgage
During this time of economic upheaval reverse mortgages have become an attractive option to the elderly home-owning population. Through which the homeowner will receive money from lenders for their home equity for as long as they are alive or is still living in their home.
The right class of reverse mortgages can help a struggling senior maintain his or her standard of living while retaining ownership over the mortgaged property. However the disadvantages may outweigh the benefits especially in cases where in the senior does not fully understand the intricacies of reverse mortgage agreements. Great care and caution must be taken before going into an agreement by educating yourself on how does a reverse mortgage work.
In the best case scenario, seniors will not be subjected to any more financial stress due to entering into reverse mortgage agreement and even help them by mitigating and staggering costs to a manageable level.
However there are some reverse mortgage companies and institutions that may take advantage of the differences between conventional vs reverse mortgages and being aware of reverse mortgages pros and cons can help to avoid these pitfalls.
One disadvantage is the relatively higher cost of reverse mortgages over conventional loans. The rising debt nature of reverse mortgages means that they almost always tend to be more expensive than a conventional mortgage. You can learn more details by following this link.
For example, when accepting a $300 per month payment in a reverse mortgage with 12 percent yearly interest that is compounded monthly: in ten years time the senior will receive $36,000 in payments but owe over $70,000 to the mortgager. That is almost double the amount the senior has received.
Another disadvantage of reverse mortgages is that their contracts are extremely complex and very confusing to non-experts. These contracts can hide charges and fees imposed by the lender from the seniors eyes. One objective place to get more information is Reverse Mortgage Alert, an independently maintained and updated resource.
The many fees and obligations that can be hidden inside contracts can quickly add to the already high cost of reverse mortgages. A senior must be wary and analyze their contracts carefully and thoroughly to avoid such additional fees.
The best way to avoid all of the disadvantages of reverse mortgages is to seek expert advice from reputable and knowledgeable people. Taking the contracts to counselors and to your lawyers may seem unnecessary but their advice will lead to better decisions should you elect to opt for this type of mortgages.
Choosing reputable lenders will also lessen the amount of risk involving reverse mortgages. With the proper information and preparation getting a reverse mortgage need not become a disastrous affair.