Despite the fact that there are numerous benefits and advantages that are associated with reverse mortgages, they also come with a series of disadvantages and problems. However, most people focus on the benefits of these loans and forget to realize the power and negative impact that comes with these loans. Most home owners only focus on the fact that they will be granted a high amount of money in form of a reverse mortgage, money that they do not necessarily need to payback as it will be repaid by the heirs to their estates. However, it is important for home owners to be aware of the fact that these loans come with a number of conditions that may plunge the borrower into deep problems if not handled in the best way possible.
Problems that are associated with reverse mortgages are such as:
Repayment of the loan
A reverse mortgage is highly advantageous to home and estate owners but equally disadvantageous to the heirs of the home and or the estate. This is due to the fact that the burden of repaying back the loan is passed on to the heirs of the estate after the death of the borrower. It is important to be aware that the amount due can even exceed to $1 million especially in cases where the loan awarded was over $600,000.This amount of money can easily put the heirs of the estate into deep financial problems and at times it can even lead to the sale of the estate.
Estate and inheritance
A reverse mortgage ties down the borrower to the estate in such a way that the borrower can not vacate from the estate, sale it or even rent it out. Either of these activities results to the maturity of the loan and as such the amount of money borrowed plus interest accumulated interest becomes due and requires to be paid back. Terms that limit a senior from relocating from the home/ estate can easily deny the home owner an opportunity to be able to seek professional care in nursing homes. What’s more destructive is the fact that you can not use your estate to borrow a short term loan when faced by different financial emergencies.
Greed and fraud
The great demand for reverse mortgage loans has led to the upcoming of different lenders, with some of them being unscrupulous. Such borrowers are very risky especially due to the reason that their main aim is to make as much profit as possible without showing any concern about your financial wellbeing. As such, they can easily offer high cost loans that are greatly disadvantageous and uneconomical to borrowers. It is therefore important to ensure that before settling on any lender, you should extensively examine his/her terms and conditions.
Ask for guidance
It is paramount to hire the services of financial advisors before deciding to borrow a reverse mortgage. This is due to the reason that there is usually a great possibility that there exists other financial options that may be cheaper and fair to you.