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Reverse mortgage problems Print E-mail
Reverse mortgage - a savior or a source of problems for senior citizens? Well the debate still wades on. For some, it is a great boon as it helped them afford a lifestyle that they otherwise could not even dream of. For others, it has been a disappointment, mainly because they didn't understand the reverse mortgage problems before getting one. Following paragraphs seek to address some of these concerns. Please understand that a reverse mortgage is different from normal mortgage in many ways. While, in a normal mortgage you take a debt and as you pay back your debt, your home equity keeps increasing as the debt reduces. However, in a reverse mortgage, as the name suggests, the process is just opposite. Here, the homeowner keeps getting a regular loan advance or a lump sum amount, but in return, the home equity of the home owner keeps reducing. Towards the end of the tenure of the loan, the home equity can even go down to zero. Thus the home owners lose their right to the property after a certain point. This can be a severe setback to those home owners who were looking to leave a certain property for their posterity. Another of the reverse mortgage problems could be the fact that in case of joint applicants, the age of the younger applicant is considered for issuing the loan. The general rule is that the older the applicant, the better loan amount he/she can get. However, because of this rule, many couples lose out on quite some amount of payment. One more of the reverse mortgage problems is the high interest rates that are applied to these reverse mortgage loans. Most of the lending agencies charge very high interest rates for the loans and thus the loan advance amount is much lesser than it should be. Another of the reverse mortgage problems is the predatory pricing being imposed on the homeowners by some of the reverse mortgage companies. However, to counter this problem, the law has made it mandatory that the homeowners meet a reverse mortgage counsellor. This is for them to better understand the implications of reverse mortgage and the fees that are being charged to them. Also, to ensure that the lenders follow certain guidelines, the lenders association has actually come out with code of conduct and best practices list which it expects all the member lending organizations to follow. Many people do not consider these as that big a problem when compared to the benefits that the reverse mortgage loans give. Hence, they choose to ignore them. The aim of this article is to ensure that you are aware of the problems and then take a conscious decision.


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