Protecting Yourself Against Reverse Mortgage Pitfalls
A reverse mortgage is a safe and effective financial tool that can put comfortable retirement in reach for many seniors, even if you expected that you would have to work throughout your retirement years to make ends meet.
While it is true that a reverse mortgage may not be right for everyone, there have been some misleading scare stories in the media recently about reverse mortgage pitfalls that have, in some cases, caused people to miss out on the benefits of reverse mortgages. Before deciding if a reverse mortgage is right for you, you should not only understand the benefits, but you should also be aware of some important reverse mortgage pitfalls.
To learn more about reverse mortgage requirements and to find out if one is right for you, contact us today online or by phone.
Reverse Mortgage Pitfalls You Need to Consider
#1: You Need to Remain Current on your Homeowner's Insurance and Property Taxes
Many people use a reverse mortgage to escape from mandatory monthly mortgage payments. One of the reverse mortgage pitfalls, however, is that it does not entirely remove the obligation for all payments related to the house. To stay current with your reverse mortgage, you need to make all the required property tax payments, maintain your homeowners' insurance, handle basic home repairs, and fulfill other related obligations.
You can avoid these reverse mortgage pitfalls by simply accounting for those obligations in a financial plan. In most cases, the payments from a reverse mortgage can more than cover those obligations. A little bit of discipline and forward thinking can turn this reverse mortgage pitfall into a minor detail that you do not need to worry about.
#2: You Need to Remain in the Home
While a reverse mortgage can be used to finance a home purchase, one of the top reverse mortgage pitfalls is not being aware that you need to remain in the home for the period of the loan. Reverse mortgages are a great way to age in place, but if for any reason you need to vacate the home permanently - such as a health emergency - the loan may become due if the vacancy period lasts for more than 12 consecutive months.
The easy way to avoid reverse mortgage pitfalls related to vacancy is just to make sure to document where you live and to avoid vacating the home for longer than 12 consecutive months.
#3: Bring Your Heirs and Your Executor on Board
Estate issues are a common source of conflict within families. Therefore, some of the more common reverse mortgage pitfalls are related to a misunderstanding of heirs can expect.
Reverse mortgages are ideal for families that do not plan or need to pass on a house or home equity to heirs. However, if you do not plan with them and coordinate with the executor of your will when taking a reverse mortgage, there could be some chaos when it comes time to transfer the property.
The main ways that your heirs can avoid reverse mortgage pitfalls if they want to keep the house will be to:
- Plan to repay the reverse mortgage when it comes due upon your death or relocation
- Make arrangements to refinance the home with a conventional mortgage
Learn More About Reverse Mortgage Pitfalls
For more details about how to avoid the reverse mortgage pitfalls that some borrowers encounter and for help deciding if a reverse mortgage is right for you, call us at (800) 480-6828 or use our online contact form today.