While gathering reverse mortgage information, it is easy to get excited about these loans. If you are a homeowner over 62 years of age with a significant amount of equity in your home, you might be able to withdraw a portion of your equity and defer payment until you sell the home, pass away or move into a new residence. For most seniors, reverse mortgages provide financial security. However, some seniors are ignoring vital reverse mortgage information and making two dangerous mistakes.
Mistake #1: Rushing Into a Reverse Mortgage
To qualify for a reverse mortgage, all borrowers listed on the title of the home must be 62 or older. Due to the benefits of getting a reverse mortgage, some seniors are anxious to take advantage of these loans as soon as possible. Some seniors are so anxious, in fact, that they are willing to take their younger spouse off the title of their home to qualify. While this might seem clever, it can lead to future problems.
If a reverse mortgage is put in one spouse’s name, the loan will become due upon the individual’s death–regardless of whether his or her spouse is still living in the home. Some seniors get around this by refinancing their reverse mortgage once their spouse turns 62. However, if borrowers do not have enough equity left in their home, they might not be able to refinance. To avoid future problems, seniors should wait until both spouses are at least 62 before pursuing a reverse mortgage.
Mistake #2: Not Considering the Future Costs to Maintain a Reverse Mortgage
Getting a reverse mortgage too early is not the only mistake seniors can make. One important piece of reverse mortgage information that seniors sometimes miss is that there are guidelines to maintaining these loans. To keep a reverse mortgage from becoming due, borrowers must stay current on their homeowners insurance, home repairs and real estate taxes. If these requirements are not met, the reverse mortgage will become due, which can put borrowers in danger of losing their home. While a reverse mortgage will lighten a senior’s load, it will not eliminate all of his or her bills. Before taking out a reverse mortgage, seniors must determine whether they can realistically afford the long-term costs associated with these loans.
