Don’t Throw Caution to the Wind - Some Things to Watch for with Reverse Mortgages

You are retired and are finding it not easy to make ends meet each month.  Your financial situation has changes in the recent slow economic times.  You are a homeowner and have heard great things about senior reverse mortgages.  They are tempting but you should investigate all of your options before signing on the dotted line.

With a reverse mortgage, you will still be responsible for paying taxes, insurance and other fees so your monthly take home pay may be less than what you originally thought.  So, be sure to consider this when you are initially calculating what funds you will receive. 

You cannot leave your home permanently after you have obtained a reverse mortgage.  If you do, the loan becomes due.  Let’s say that you suddenly have to move because your health has necessitated assisted care in another location.  The lender will then sell your home and you will be given any equity beyond what you owe on the reverse mortgage.  However, it is possible that the balance may be more than your equity which means that you forfeit any additional funds from the sale of your home.  Or, you may live part of the year in another location, meaning that the home with a reverse mortgage is no longer your “primary residence”. 

Sometimes reverse mortgages come with high fees and adjustable rate mortgages.  In the long run, you may not be able to afford any changes in interest rates that might occur.  Just make sure that you get a fixed rate mortgage when obtaining a reverse mortgage on your home.

While getting cold hard cash by using your home equity is tempting, be careful on how you spend it.  You never know when you might need this money for emergencies that could  possibly occur later on in life.  It might be better to forego that exotic vacation now so that you have funds available for other luxuries later on!  Plus if you share your life with someone else, it’s assuring to to know that even if catastrophe strikes one of you, the other person has a plae to live. 

Senior reverse mortgages are a way for you to realize a better future.  These reverse mortgages are wonderful ways to assist you in these difficult financial times and to make your future more secure.  As a senior citizen you do need to consider all of your options when making financial decisions and should take the time to know the pitfalls of some of them.  A reverse mortgage can help you realize your future goals but you must also realize that there are pitfalls to these types of mortgages.