Reverse Mortgage Pitfalls - What You Need to Know

Reverse mortgages allow homeowners who at least 62 years old to take a loan using part of the equity of their homes as collateral, thus converting the equity into cash without having to sell their homes.

Generally, the homeowners after receiving the loaned amount from the lender will not have to pay as long as he or she lives in his or her home. The load is repaid once the house is sold generally after the homeowner dies or leaves the residence.

Reverse mortgages were designed to help cash-poor older citizens who already substantial equity in their homes but do not fully own them yet. The proceeds are generally tax free and are not subject to income restrictions.

We should be wary however of certain reverse mortgage pitfalls. By resorting to reverse mortgage, the homeowner should know that he or she might be giving up or spending the inheritance of his or her children.

While lenders seldom take the title of the property upon approval and release of the loan, it is usually repaid by selling the loan after the death of the homeowner, leaving the children with no home to inherit.

The next of many reverse mortgage pitfalls is the charges. The homeowner should also be aware that there are lots of charges of him or her to be able to avail of a reverse mortgage. Usually, there are initiation charges and appraisal, credit report, inspection and other fees which could total to more than a thousand dollars.

Still another of the many reverse mortgage pitfalls is the realities of old age. Elderly homeowners may not have the financial sense to handle and spend the sudden large cash flow from a reverse mortgage wisely. If not monitored properly, plenty of cash might go down the drain on unnecessary things and on things they need most.

Are you are looking for more information on Reverse Mortgages, then You need to read Reverse Mortgage Lenders: Senior Citizens Earning Money.

To read more about Mortgages Go to TopMortgageAdvice.com for all your Mortgage Advice.

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