Dangers Of Reverse Mortgages, Lose Your House And Your Money
A reverse mortgage allows seniors to use the equity in their home and receive tax-free income without having to give up ownership, or make a monthly payment. The money that is received is paid back when the home is sold, usually after the owners have died or moved into other living arrangements. The amount of money received depends mainly on your age, how much the house is worth, the interest rate, and the current mortgage balance, if any.
There are three ways you can get your money. You may choose to take it as a lump sum payment. Alternatively, you may elect to receive set payments every month. The final option is to secure a line of credit you can tap as needed. Dangers of reverse mortgages come with each of these choices. Research each option and choose wisely.
In a reasonable and situation, a reverse home mortgage can help a homeowner. Senior citizens are persons who have the most to gain from a reverse home loan, but they must be weary of businesses who prey on unsuspecting customers, unrealistic loan interest rates or other dangers. Without research and carefulness, a reverse home mortgage can corner a homeowner into losing their home.
You will find that a reverse mortgage often comes with an adjustable interest rate. Remember what that means, though, that the rate can change- often in the upwards direction. Overall, a fixed interest rate is a safer bet, protecting you against the variables of an uncertain economic future, and undoubtably saving you money in the long run.
Reverse mortgages also come with a clause that binds you to stay at the house as your primary residence. This means that any change of residence, even to a care- facility will mean that the house reverts to the reverse mortgage lenders who would sell to recover their money. The home equity beyond what is owed is then paid to the owner. This may not only mean a loss in money, but the house is gone!
Make sure that you are very aware of the common dangers of reverse mortgages. One of the biggest problems encountered with a reverse mortgage is with the sudden influx of cash. It can be too easy to go off and spend this somewhat unexpected, and often large, amount of money. Be on your guard against this temptation.
There are three common options when you acquire a reverse mortgage: one large payment, fixed payments on a monthly basis, or an accessible credit line. Consider each option but don't forget the dangers of reverse mortgages, such as higher interest rates and fraudulent firms. They also bind you to the house as your primary residence, so any change in housing, even to a care facility will means the house reverts to the lenders who would sell to recover their money. The home equity beyond what is owed is then paid to the owner. Make sure that you are very aware of the common pitfalls of this kind of home loan.
Published December 28th, 2008
Filed in Real Estate