How to Avoid Reverse Mortgage Problems
Seniors or those over the age of 62 are sometimes tempted by financial situations to consider a reverse mortgage. Although the loans are regulated, it doesn’t prevent some shifty and underhanded people from offering them. Remembering that with the exception of the FHA, lenders are in it for the profit, and that is their bottom line. There are some things that can be done to avoid reverse mortgage problems either now, or down the line.
Do it for the Right ReasonsThe elderly may be in a financial bind for a variety of reasons. Medical bills, home improvement and repair, or even to take a dream vacation. Beware of people and organizations that suggest risky investments or purchases with the proceeds of a reverse mortgage. Using the money for any financial product can be risky, to say the least. Avoiding a gamble of any kind can be paramount to avoid reverse mortgage problems.
Investigate the LenderThe Department of Housing and Urban Development has a website which can be used to find out if the lender and the counseling are approved. This is a safety net which should be utilized. Stress and fear, as well as loss, can be eliminated by doing a little research. It only takes a few moments, but it can literally save a person from financial ruin and being homeless. Checking the Better Business Bureau may be beneficial as well.
Know the Loan OptionsThere are two types of reverse mortgage loans which can be obtained; lump sum and monthly payments. Depending on an individual’s situation, one will prove to be more logical than the other. There are pros and cons to each type, which are dependent on several things, such as the amount of money needed and how quickly the money will be spent. Consider each loan type and weigh that against the financial situation at hand.
Know all Fees InvolvedThe bottom line is the amount the lender tells you that you will receive should be weighed against the amount of the fees involved. Not all lenders are created equal. Unfortunately, a reverse mortgage can put dollar signs in the lender’s eyes more than the borrower’s eyes. Make sure all fees and costs are spelled out before signing on a reverse mortgage. Be sure all variables are understood and put into writing, so there is no question later.
The number of seniors applying for reverse mortgages has dropped. Interestingly, there is a big push by lenders to offer them. Gut instinct is often correct, so if something just doesn’t feel right, it probably isn’t. Never allow yourself to be pressured into any type of loan. It also may be a good idea for an adult child to accompany their parents when checking into options and before signing the papers. A little common sense combined with planning and investigation can go a long way in avoiding reverse mortgage problems.