Tons of advertisements make reverse mortgages appear great. Commercials feature celebrities talking about the benefits of this feature. However, what they are not actually telling you is that it can put your home at a huge risk. So, it is worth knowing about reverse mortgages and the dangers that come with it.
What is a reverse mortgage? Basically, it refers to the loan taken by a senior citizen or home owner at a minimum age of 62. This is where neither the interest nor principal requires repayment until the individual, who borrowed moves, sells the unit or passes away. The fees for the loan related with this type of mortgage can be twice, thrice or more of the standard mortgages. Also, the fees are subject to compounding on a monthly basis over the entire loan term.
In case you are worried about the high cost of loans, you may wish to explore all other alternatives for getting funds prior to opting for a reverse mortgage. Although this loan can serve beneficial in a very few instances, like letting senior citizens stay in their home instead of having it sold to pay for health and unexpected expenses. Yet, in most cases, a huge threat to financial security, so consider the dangers before acquiring one.
Reverse Mortgage – The Dangers
If you are not sure whether you should sign on a reverse mortgage loan, take a look at the following dangers:
What is a reverse mortgage? Basically, it refers to the loan taken by a senior citizen or home owner at a minimum age of 62. This is where neither the interest nor principal requires repayment until the individual, who borrowed moves, sells the unit or passes away. The fees for the loan related with this type of mortgage can be twice, thrice or more of the standard mortgages. Also, the fees are subject to compounding on a monthly basis over the entire loan term.
In case you are worried about the high cost of loans, you may wish to explore all other alternatives for getting funds prior to opting for a reverse mortgage. Although this loan can serve beneficial in a very few instances, like letting senior citizens stay in their home instead of having it sold to pay for health and unexpected expenses. Yet, in most cases, a huge threat to financial security, so consider the dangers before acquiring one.
Reverse Mortgage – The Dangers
If you are not sure whether you should sign on a reverse mortgage loan, take a look at the following dangers:
- Health – Your future health can be one of the biggest dangers of this type of mortgage. Your future is unpredictable and reverse mortgage usually comes with stipulations concerning instances needing instant repayment and worst, home foreclosure. There are some who outline the number of days or period your property can remain vacant prior the lender call the existing loan. For instance, if you had a stroke and spend 2 months in the hospital or rehabilitation, the lender have the power to foreclose the house or call the loan since the property is not occupied. In such case, the reverse mortgage should be settled and the house will be sold.
- Eviction – A reverse mortgage can affect all dependents living in the home. For instance, if the elderly who requires facility care lives with family members who are non-borrowing and the loan is due, all those members should move out. The ones who could get evicted include your spouse, children or grandchildren. According to thereverse mortgage rules, they are considered tenants and they need to leave together with the borrower.
- Eviction – A reverse mortgage can affect all dependents living in the home. For instance, if the elderly who requires facility care lives with family members who are non-borrowing and the loan is due, all those members should move out. The ones who could get evicted include your spouse, children or grandchildren. According to thereverse mortgage rules, they are considered tenants and they need to leave together with the borrower.
- Default – If you fail to settle property taxes, fail home maintenance or keep up home insurance, you can be in a default situation giving the lender the right to foreclose your home. Then, lenders have the right to buy it a low price and sell it for profit.
- Heirs Should Pay Loan. The principle along with interest and other fees should be paid before heirs could be given possession of the property. If heirs cannot do so, the lender can foreclose the home and have it sold.