1. Adjustable Rates
When considering a reverse mortgage, you need to be wary of adjustable rates. While a lower interest rate is a nice possibility, keep in mind that a lower interest rate could become a higher interest rate in the future. That said, as long as you speak with your mortgage broker and are sure you understand the agreement fully, you can avoid this situation.
2. Clients Feel Pressured
Sometimes family members or other party will make a client considering a reverse mortgage feel pressured to sign. A lot of times this is because the family feels it is the senior’s only choice, or they are trying to rush the decision for other reasons. It is the responsibility of the client and the clients’ family to make sure they are being treated respectfully. Never sign with a company that is using unethical tactics to get you to sign on with them.
3. Less Equity for Heirs
It is a common misconception that you will lose the rights to your home when you get reverse mortgage, but this is completely untrue. The title of home will remain in your name throughout the entire loan. However, upon passing away the loan holder’s heirs will then need to settle the loan, and depending on the length of the reverse mortgage, the amount of equity left to their heirs is significantly reduced.
4. Contract Fine Print
When signing any important document, you should be sure to read every single word and make sure you understand them fully. Complaints about fine print in reverse mortgages vary by the company. However, one common complaint about fine print in reverse mortgage documents is that the loan must be repaid if the home is unoccupied for a long period of time. This will happen if the occupant is hospitalized or sick for an extended period of time (usually 6 consecutive months) and cannot return home.
5. Not Good for Travelers
A reverse mortgage is not the right choice for you if you are looking to move into a new home in the near future. A reverse mortgage is usually taken out on your last home; to be paid off once the home is no longer occupied. If you do vacate the home then the loan will need to be paid off within six months, even if you are just moving down the street.
