Lets review the top 3 reverse mortgage disadvantages. Reverse mortgages are a fantastic financial product in the right circumstances, but that doesn't mean that they are perfect.
Those who are in the reverse mortgage industry who are afraid to clearly layout the disadvantages are doing potential clients a disservice. Full transparency allows consumers to make educated decisions and be fully aware of both the pros and cons of the product being offered.
Top 3 Reverse Mortgage Disadvantages
The first reverse mortgage disadvantage is the upfront costs. Homeowners over the age of 62 who are qualified for reverse mortgages should be made aware of the fees. The fees are 2 fold. Both the front-end and the back-end. Different reverse mortgage lenders & brokers have different fee structures. Some professionals front-load their fees and some also get paid for a higher rate. It is critical you understand this as it can cost thousands of dollars.
The second reverse mortgage disadvantage is that you must live in that home as your primary residence. If you intend on purchasing a second home as your primary residence, then your reverse mortgage loan would come due.
The third and final top 3 reverse mortgage disadvantage would be the interest accumulation. This is how the reverse mortgage lender (bank) makes their money. This confuses many because there is no mortgage payment. However, the amount you owe on the reverse mortgage loan gradually increases as time goes on. Interest and fees are calculated before the loan closes and included in the loan.
The Bottomline: Reverse mortgage have upfront fees that can range from $8,000.00 to over $15,000.00. This amount is dependent upon the homes value and the homeowners age. You must also live in that home which you completed the reverse mortgage on as your primary residence. Lastly, interest accumulates more and more as time goes on.
Now that you clearly know the top 3 reverse mortgage disadvantages, feel free to ask your reverse mortgage professional about how these disadvantages can impact your reverse mortgage loan. In some instances, other mortgage products are better suited for homeowners so it is best to get an analysis if you are unsure.