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Disdvantages and negative implications of reverse mortgages
Reverse have become a financial saver for most seniors who have homes and or 3-4 housing units. This is a special type of a long term loan that has been designed in a way such that it requires the estate’s equity to act as security of the loan. This type of loan does not require the borrower to repay back the loan except in situations whereby you breach the terms and conditions in the contract. The loan looks quite advantageous in itself but there are numerous things that lenders do not tell borrowers. These things are such as:
A reverse mortgage is a quite expensive financial option especially in the long run. This is irrespective of the fact that the loan does not require a monthly repayment but it attracts a very high interest rate in repayment. While paying back the loan, borrowers require ensuring that they are aware of the interest rates charged by the lenders. In addition to this, the borrower should also be able to calculate an estimated amount that the loan is bound to cost in repayment. This is so as to avert a possible occurrence whereby the heirs of the estate may be forced to sell the estate in order to repay the loan.
Terms and conditions
One thing that most borrowers are never aware of is the fact that these loans have very strict terms and conditions, most of which might prove to be quite hard to meet. Most lenders do not inform borrowers on the negative impacts that some of the terms and conditions in these loans have on their personal lives. A reverse mortgage requires the loan applicant to occupy the house until such a time when he/she dies. As such, these terms are quite limiting to the borrowers especially in situations where there may be need to seek professional medical care.
The eligibility standards that have been set for consideration in a reverse mortgage are quite strict. This is due to the reason that each borrower requires to meet the minimum age limit of 62 years of age. In a case where a couple is applying for a reverse mortgage, the age of the younger is considered in he/she has attained 62 years of age. It is usually very important to ensure that before applying for a reverse mortgage, you should meet all the eligibility standards set for these loans.
A reverse mortgage does not exempt you from having to meet the expenses that are incurred for running the estate. These costs are such as taxes, repair costs and costs for services such as electricity and water. Failure to meet these costs can automatically lead to the maturity of the loan and as such, you end up been required to payback the loan amount as a lump sum. This can easily put you through an entirely heavy financial burden especially in cases whereby you do not have the means to meet the repayment costs of the loans.
However, despite the numerous disadvantages of a reverse mortgage, it is usually very important especially in that it helps you enjoy your retirement in peace. This is due to the reason that you do not have to rely on other people for your own financial support.