There are general myths about the reverse mortgages but the actual working of reverse mortgage is totally different. There are many disadvantages to the reverse mortgage loan and the person taking the loan must understand that and confirm thoroughly whether it is the best viable option for the individual. The Reverse Mortgage may not be the best tool always.
The individual planning to take the reverse mortgage loans considers the credit history of the individual. But the fact is that there is no need for a very good credit history to obtain the reverse mortgage loan. Even if the individual has been declared bankrupt in the past even then the person can get the reverse mortgage loans. Those individuals who are going through the phase of foreclosure can also be benefitted from the reverse mortgage.
There are various financial companies offering reverse mortgage loans. Even though there are competitors the basics of the game remains the same. The reverse mortgage allows the individual to convert at least 45% of the home equity to cash. The financial experts provide a warning that there are many draw backs in the reverse mortgage loans.
Reverse Mortgage Can be a Great tool even for persons having bad Credit History. The interest rates charged are two – three percent higher than the normal equity loans. The experts suggest the individual should go for the normal loans rather than reverse mortgage loans.
The individual should check the compounding of the interest whether it is monthly or semi annually. If the owner of the house wants to downsize and move to a different place then reverse mortgage is not the best tool. The costs are very high in such cases.
The most dangerous part of reverse mortgage loan is it affects the heirs in the family. In case the parents finalize to take the loan they should think about their children. What if they are not able to pay back the amount then the property shall be taken over by the financial companies or banks.
The individual has to very thoroughly look for their situation down the line after five years. Moreover the individual fails to consider the taxes and the maintenance part of the house. In case the taxes are pending to be paid and the house is into repair the bank can at any time wind up the loan and ask the individual to pay back the loan immediately.