For many older US citizens, the opportunity to cash in on the equity that is in their home is a Godsend, but they must beware the reverse mortgage pitfalls. And, yes, they do exist.
Though the values of this kind of mortgage are extolled in many kinds of media, senior citizens must be conscious of all the facts about them. While they can experience a cash benefit from a reverse mortgage, they can also spend a great amount of money getting one. Additionally, some folks may feel uncomfortable with the approaching sale of their home looming over them each time they become ill or need to go into the hospital for any reason.
The idea behind a reverse mortgage is a sound one. After paying into a standard mortgage over a period of years, people may enter their golden years to find they are living in an equity-rich home yet not have enough extra funds to enjoy their planned retirement. A reverse mortgage permits them to draw off some of that equity as a monthly stipend or take a lump sum payout. They will continue to live in and retain full ownership of their home till the time they die or must leave the home to enter controlled living. At no time do they repay any of the monies received from the equity. When the home is no longer used as the primary residence of the pensioner, the lender takes control and sells the home.
When obtaining a reverse mortgage, pitfalls can be steep in the way of fees. There are countless charges that are applied, and can easily amount to giant amounts of money, depending on the value of the home. Should the home be sold outright by the homeowner, the fees the bank might have garnered would remain in the pockets of the home-owner; supplying them with even more equity than the reverse mortgage proceeds would have given. This amount could be in the thousands of greenbacks, which could provide rental payments on a loft or help to pay for an RV in which to travel.
There have also been reports of people who, after taking a reverse mortgage, experience a health issue that requires a hospice stay. These seniors have told of appraisers arriving at their home for the purpose of getting info for a home sale; predicting the death or incapacity of the home-owner. This kind of discomfort seriously affects the wellbeing and psychological state of the homeowner, plainly.
While many folks can gain benefit from a reverse mortgage, problems do exist that may reduce the benefit for others. Careful consideration of alternative systems of obtaining money should be taken before agreeing to this kind of mortgage.