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Seniors who are interested in learning more about the reverse mortgage program should 100% start by reviewing all the cons of the HECM loan before committing to getting one. While the reverse mortgage is a safe government solution – it is not for everyone – and by reviewing the negatives/cons we can provide seniors with a better point of view.
Cons of the HECM Reverse Loan in 2013
No program is perfectly designed to alleviate everyones problems but the reverse mortgage does a good job for some 100,000 seniors on a yearly basis (one of the biggest myths is that the program is not safe but how can 100,000 seniors every year take r everse mortgage if it were not safe – and why would our government provide insurance to the banks to make these loans if they were not safe).
As with any mortgage program there are cons involved – lets review the main negatives on the reverse mortgage loan
money is not a free government grant – but instead it is a loan for seniors to release equity or to release some cash for their retirement.
there is still risk of foreclosure if the property taxes are not paid or if the property insurance is not paid (maintenance also required by the borrowers)
borrowers have to be over the age of 62 – if one borrower is not the loan can still be used but there is more risk as if anything happens to this qualifying borrower the loan could become due and payable (because the other borrower is not 62).
interest rate charges do apply to a reverse mortgage – so while there are never any mortgage payments due payable the loan is accruing interest on the back-end of the loan (go back and read #1 this is not a free grant so there are fees involved)
there are upfront fees (origination fees) with most programs and banks – closing costs can amount to a few % points of the value of the home (the HECM program is not free for seniors to use there are fees to pay)
not all properties qualify and not all borrower qualify for this loan option
for more information
62 years or older (or at least 60 days from turning 62)
You own the home (if there is an existing mortgage having equity is required)
You have sufficient equity in the home (take the value of the home minus any mortgage balance – this is the available equity – more equity is better)
Must be your primary residence (live in the home for 183 days out of the year)
Never have defaulted on government backed debt