The Dangers of a Reverse Mortgage Loan

Many years ago, the only way an individual or couple could get money from their home was to rent it out, sell it, or refinance it through home equity loans. In the past few years, reverse mortgage loan options or also known as lifetime mortgage loans, have skyrocketed. Reverse mortgage loans (lifetime mortgage) allow senior citizens that are over 62 years of age to defer mortgage payments until either the individual or couple dies, sells the home, or is put into a nursing home. The purpose of reverse mortgage loans (lifetime mortgage) is so the senior citizen(s) does not have to move out of the house, sell it, or make monthly payments. The house is paid off when the above happens to the individual(s) with their reverse mortgage loan (lifetime mortgage).

The Dangers of a Reverse Mortgage Loan: A Lifetime Mortgage Can Be High In Interest & Costs

Reverse mortgages (lifetime mortgage) has many different fees and requirements compared to regular mortgage loans. According to Wikipedia, "For the most popular type of reverse mortgage in the U.S., the FHA-insured Home Equity Conversion Mortgage (HECM), there is an insurance premium of 2% of the loan and an origination fee in addition to normal closing costs, which are typically several thousand dollars, but vary depending on the third-party costs (appraisal fees, title searches, etc.) which must be undertaken." Anything after $200,000 has another 1% tacked on. The cap is only for below $200,000. Some lenders of reverse mortgages (lifetime mortgage) also charge monthly fees for just have the type of home equity loan.

The Dangers of a Reverse Mortgage Loan: "Jumbo" Reverse Mortgages Aren't Insured By the FHA

Jumbo reverse mortgages (lifetime mortgage) are due to a high valued property to provide larger loan sums that are over the highest bound; however, currently the FHA does not insure this type of loan financing. The closing and other related fees are also quite a bit higher in costs for jumbo reverse mortgages (lifetime mortgage). Thus, a jumbo reverse mortgage loan (lifetime mortgage) could potentially be a bad option.

The Dangers of a Reverse Mortgage Loan: Any Type Of Public Assistance Received Uses The Funds To Be Accounted For "Liquid Assets"

If any senior citizen receives any type of public assistance, whether it is for cash, food, or medical through the government, the funds that are held in savings or a checking account from the reverse mortgages (lifetime mortgage) will count against them. The borrow could lose any type of public assistance from holding such a great deal of money in any type of bank account because it would disqualify them for the public programs.Most programs only allow individuals to have a certain amount of cash (liquid assets) available in a savings account or checking account. Thus, reverse mortgages (lifetime mortgage) could hurt seniors who cannot afford medical insurance and food if they have such a loan.