What are the disadvantages to the reverse mortgages?

Every mortgage program has its pros as well as its cons, the reverse mortgage is a government insured program which for many years was not accepted in the mainstream media for its high costs and its complexity (this is not the case anymore with some 100,000 seniors last year alone taking out a reverse mortgage). When considering a home equity conversion mortgage one should be aware of the disadvantages that exist with the HECM program in order to be educated and to make an informed decision.

Table of Contents – Reverse Mortgage Disadvantages
A) The disadvantages of the HECM reverse loan
B)  What is a reverse mortgage
C) Steps involved and the process of getting a reverse loan
D) FAQ of reverse mortgage

A) Disadvantages of Reverse Mortgages

There are many seniors who are concerned in regards to the disadvantages of a HECM reverse mortgage loan but the reality is that the pros by far outweight the cons if you are a senior who is considering taking equity out of the home. The biggest disadvantage used to be high closing costs but with our free comparison service you will save time, money, and energy in getting a HECM loan. (At the moment you can get a No Fee Reverse Mortgage Loan).

• you are borrowing money- You are taking a loan out on a home which the interest accrues in the back of the loan. This is not free government money.
• taking a loan so you will leave less equity to heirs- As your home appreciates there will most likely be the same % of equity available.
• fees- There are high fees involved when closing a HECM loan (as mentioned above many of the fees have come down considerably and now there is even a no fee HECM)
• tax and insurance payment – You still have to pay for property taxes and insurance.
• need equity to qualify- As home prices drop, so do the values on the appraisal; thus making it tougher to qualify for a reverse mortgage if you don’t have sufficient equity. One step in the process is to get an appraisal done – we can tell you ball park what the home should be worth so you don’t waste time, money with an appraisal.
• ever defaulted on government loans?- If you have defaulted or even been late on government backed loans, you will not qualify for the program.

* HUD is in talks in regards to approving the ability for lenders to review your financial well being. This includes reviewing your income, credit scores and mortgage payment history to determine whether or not to accept your application. This would make it tougher for seniors to qualify into the program.*

pros of a reverse mortgage loan?

• own the property- you keep ownership of the property and not the bank.
• no mortgage payments- you never have another mortgage payment to make for as long as you live in the home (need to sell no worries you can sell the home).
• more income- you will replenish your retirement savings (it will be a new form of income) – as your home value increases you will have more equity to tap into to.
• low rates- the interest rates are extremely low in 2012 take advantages of the low reverse mortgage rates.
• tax free- the income/fees which you receive are always tax free.
• your choice- you can select how you want to receive your income: monthly income for life, lump sum or a credit line.
• since it is your home you can remodel as you wish without having to ask for permission.
• heirs- you can leave home for heirs, to your estate, or trust.
• NO foreclosure- you are not at risk for foreclosures since there are no monthly mortgage payments (you do have to pay for taxes and insurance).
• protect your equity – home prices are not stable with a HECM loan you can essentially protect your equity by taking out a portion of it (turning into cash).

There are more pros than cons, you should consider your specific retirement situation and finances before deciding to take a reverse mortgage.

NEGATIVES OF REVERSE MORTGAGE LOANS

Many of the disadvantages we hear about have a lot to do with greedy companies who overcharge for a reverse mortgages or those who pose as reverse mortgage lenders but are in actual fact just scammers.

Recently there have been cases involving fraud where the scammers tricked seniors into taking a reverse mortgage but the customers never ended up receiving the funds (instead the scammers tricked the banks and received the funds). We only deal with lenders who are approved by HUD and FHA to do these loans and these problems would never happen with these banks since they are all approved directly by the US government.

We also believe that consumers should have the ability to shop around for reverse mortgage lenders, this is why we currently compare top lenders in order to secure you with the most appropriate HECM reverse mortgage. Without this necessary step, seniors are not provided with the full benefits of a reverse mortgage, not to mention that they can easily be tricked or conned into paying for something which they may never receive.

As the economy has underperformed for the last 5 years many homeowners who are considering a reverse mortgage are under a great deal of stress. Many have seen their retirement portfolios drop anywhere from 50 to 75%, leaving their retirement funds almost empty.

Future projections for our economy are not looking much different to the current state we are in, for this reason it is extremely important for seniors to secure their retirement income by eliminating their mortgage debt (mortgage payments, credit card payment, car payments all need to be eliminated in retirement). A reverse mortgage can do just this, whilst also allowing you to keep home ownership without having monthly mortgage payment.

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REVERSE MORTGAGE DISADVANTAGES HECM REVERSE NEGATIVES 2012 By Paul Galante – Add me to your circles