Homeowners 62 and older have the choice to take out a reverse mortgage on their home. A reverse mortgage is based upon the owner's amp & equity;mdash;the amount the house is worth, less any mortgages or home equity loans attached to it—and the owner doesn't need to pay it back so long as the house is her main residence.
Borrowing Too Far
Lenders charge a reverse mortgage to be arranged by fees, as they do to other types of loans; the bigger the loan, the higher the charges. According to the Federal Trade Commission, taking out a loan means spending money on charges than required.
Not Considering Alternatives
Loan fees and other expenses can add up to thousands of bucks, therefore it's worthwhile to check at options to a reverse mortgage. A home equity loan or line of credit, as an instance, will need to be repaid sooner, but if a homeowner compares the charges, it may work out as a better deal.
The federal Medicaid program has earnings and asset restrictions, and the cash a homeowner receives from his opposite mortgage could be enough to disqualify him, StockMarketsReview.com says. This can happen when a monthly payment is received by him, or if he chooses his mortgage in a lump sum and rescue mores of it spends. The solution is to invest the amount from the month it arrives so that savings don't grow overly big.
Falling For Scams
Between 1999 and 2008, the number of federally insured reverse mortgages went up by 1,300 percentage —making the field ripe for scam artists, the HouseLogic website says. Scams include charging hidden charges that the size of the loan, diverting the profits to the lender's investments or using a fake loan for identity theft. The site recommends doing business with a lender approved by the Federal Housing Administration.
Waiting Too Long
Older homeowners can receive larger loans because the time they'll be residing in their homes is shorter. It's tempting to wait around for this reason, StockMarketsReview.com says, however when interest rates are good, often it makes more sense to take out the loan rather than later.
A mortgage is a large financial decision, and homeowners sometimes register for a loan before all their questions have been answered. It's much better for an owner to spend the opportunity to find out everything she wants to know prior to committing to the loan.