Tag Archives: Disadvantages

Disadvantages Of A Reverse Mortgage

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On the surface, reverse mortgages seem like a great idea, but they are not right for everyone. It seems like everyone touts the advantages of a reverse mortgage, but the disadvantages are not always brought to the light. Here is a look at reverse mortgages and some things to look out for when considering this option.

What Is A Reverse Mortgage?

A reverse mortgage is a loan that uses the equity in your home to pay you cash. You are not required to pay back the money as long as you are using the home as your primary residence. There are some stipulations to a reverse mortgage. You must be 62 years or older. You must own your home free and clear or have a very low mortgage balance that can be paid off with the proceeds of the reverse mortgage. You must also use the home as your primary residence. The only homes that are eligible are single family homes, 2 or 4 units, and some townhouses and condos.

What Are The Disadvantages Of A Reverse Mortgage?

Reverse mortgages are more costly than other types of home loans. Because you are not making payments, the amount of interest applied to the loan continues to compound month after month. It adds up much more quickly and can end up eating away all of your hard earned equity. Reverse mortgage lenders also have to ability to charge exorbitant fees.

Because it uses some or all of the equity in your home, you will not have as much to leave to your heirs. This can be a source of contention in a family. Any equity that is remaining after the loan is repaid, however, becomes yours or the property of your estate.

You are responsible for all of the real estate taxes and home owners insurance on your home. If you fail to maintain them, your loan can be called and be due in full. You must also still take care of the expense of running the home such as electricity, water, gas, and maintenance.

Additionally, you cannot claim the interest you pay on your reverse mortgage on your taxes until the loan is paid. This differs from a traditional mortgage or home equity loan where you can deduct the interest you pay on your taxes.

Things To Consider If You Choose A Reverse Mortgage

Shop around before you choose a lender. There are many different lenders to choose from, so ask lots of questions before you commit. Do not use an estate planning service to obtain your reverse mortgage. They will charge you ridiculous fees to find you a lender. HUD offers this service to you for free.

Make sure you pay attention to the APR, or Annual Percentage Rate. It is also important to consider what points you will be required to pay and what other closing costs will be imposed. If these charges are rolled into the loan amount, it will decrease the amount of money that is paid to you and you will ultimately pay more interest.

Be sure that you pay attention to all aspects and details of the loan. Make sure you understand all of the costs and stipulations. Don’t be afraid to ask questions. If the lender seems impatient with your queries, perhaps you should choose a different lender who doesn’t have anything to hide. Make sure you are well informed before taking out a reverse mortgage.

To find the latest information on Reverse Mortgages visit Disadvantages of a Reverse Mortgage as well as Lowest Mortgage Rates

Advantages and Disadvantages of Using a Mortgage Broker

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When searching for a mortgage, you will be faced with the decision of whether or not to use a mortgage broker. There are advantages and disadvantages to using a mortgage broker instead of applying for a mortgage directly with a lender.

One of the main advantages is that independent mortgage brokers have access to, and knowledge of, the entire mortgage market. Mortgage brokers are able to advise which lenders will consider your case and which lenders will not based on your individual circumstances.

Mortgage brokers are also adept at sourcing mortgages for people with poor credit ratings. They will have access to many lenders who specialize in lending to people with adverse credit. If you are in this situation, you may find it futile to apply for a mortgage directly through a mainstream bank.

Another advantage of using a mortgage broker is that they will take care of a lot of the paperwork and chasing up of the lender for you. This can save you precious time and reduce stress. Mortgage brokers will often have points of contact with the various lenders they put business through. This can help improve the efficiency with which your mortgage case is dealt with.

Mortgage brokers can also have access to exclusive deals not available on the open market. This is a major advantage of using a mortgage broker as exclusive deals can be quite favourable to the borrower.

Sometimes mortgage brokers are able to negotiate a better interest rate or lower application fees from the lender. This is rare, but it is not unheard of, particularly where a broker has a strong relationship with a particular lender.

While there are many advantages to using a mortgage broker, there are some disadvantages.

One of these includes the tendency for some unscrupulous brokers to show bias towards lenders that provide them with higher fees and commissions instead of recommending the most appropriate product for the borrower.

Also, the broker may not be as highly trained and experienced as you are lead to believe. While there are exam and training requirements, some mortgage brokers are simply not very good at their job.

Additionally, not all brokers have access to a full panel of lenders, meaning that they may not be able to source mortgages from the entire market.

Finally, some brokers charge hefty fees to their clients, particularly for difficult cases, usually relating to adverse credit. The fees can be costly and may be a deterrent to using a mortgage broker.

Whether or not to employ the services of a mortgage broker is a matter of personal preference.

Visit UK Mortgage Source to find an independent Mortgage Broker near you