Sure, that reverse home mortgage sounds wonderful for many proud homeowners, but one has to take the time to ponder the potential risks that might be involved when one decides to pay a visit to a local lender. For those who aren’t sure what the lender does, they provide the homeowner a decent cash advance on one’s home equity, and best of all, there’s no need to worry about a credit score. This article will go over the major disadvantages of a reverse home mortgage and talk about the money that will be given to a homeowner.
Be Prepared For Huge Fines
There’s no doubt the reverse home mortgage can be one of the more expensive loans out there these days. One thing the average homeowner tends to overlook is that in addition of closing costs, there’s an organization fee of 2.5 percent upon the first 210,000 due to the loan balance. There’s also a home premium for insurance that can run up to 2.3 percent, and when it comes to money, many homeowners find themselves feeling the crunch within a short time. You should also keep in mind that you can see a basic monthly charge, and if you plan to move anytime soon, you will see why the reverse home mortage isn’t for everyone.
Bigger Risk Than You Think
The truth about this loan is that you would have to be at least 61 years old or older to be apply to it, and often times this appeals to older people due to poor saving habits they had when they were younger. Believe it or not, the reverse home mortgage loan has risen up to 49 percent due to the economy. Another reason why this loan would appeal to older people is that they have lived longer than they thought they would, and over time, home equity begins to lose value.
One May Only Be Able To Borrow Less Than They Thought
The older you are, the more money you will be able to take out in the loan. But this isn’t the only major factor that would come into play when you decide to take on the reverse home mortgage. You would also have to keep in mind that the value of your home will still be applied. Also, you would have to keep in mind that the banks’ interest rates will be applied as well, thus leaving you the ability to borrow less than you thought.