As with any large financial decision, there are certain risks and rewards. Also with any large financial decisions, there are people who have heard bad things about these decisions and will stop at nothing to “do their part” in spreading misinformation.
There is a fine line between legitimate concerns and useless hysteria; discerning this line is exactly what frees you to make sound financial decisions. But how can you tell the difference between these legitimate concerns and people who are freaked out because they heard a bad story? We will outline a couple of easy to follow tips and procedures that will help you in deciding if reverse mortgages are right for you.
First of all, it is important to realize that bad experiences make the news far more often than good experiences. What news company will report on a family that takes out a reverse mortgage and has no problems with it? The real “hard-hitting” news stories come from terrible experiences that turn a life upside-down, usually in a negative manner.
On top of this, it is impossible to look into the personal stories and financial situations of every opponent of reverse mortgages. That being said, most people who run into trouble with reverse mortgage do so because of poor planning. Whether they did not read the fine print or simply misjudged their ability to pay the fees associated with reverse mortgages, it is easy to land in hot water if you are careless in your endeavors.
The other group of people who have trouble with reverse mortgages are those who run into unforeseen circumstances. This can range from a natural disaster to the death of a loved one, and easily have the ability to turn your world upside-down. How can you prepare for the unexpected? For starters, you should make sure you have contingency plans for the most probable disasters that could affect you. On top of this, it is paramount that you are frugal, thus allowing you extra money in case you are slammed by something you simply cannot see coming.
Reverse mortgage obviously do have downsides, but it is important to realize that for many people, the positives can outweigh the negatives. What you do need to watch out for, though, are fees and equity loss. If you make sure you understand all of the fees and charges you will have to pay as a result of your reverse mortgage, there is no real reason you should go under. Some common fees include origination and interest payments.
The bottom line is as follows: do your research. There is absolutely no getting around taking the time to fully understand how reverse mortgages work, what they will do for you, and what you will have to give up. Once you feel you have adequately done this, you should shop around and compare rates from different reverse mortgage lenders. When you find the best rates possible, a quick analysis of your current finances should quickly tell you if you can afford a reverse mortgage. If it’s close, don’t risk it!