Chances are you’ve seen the commercials on television advertising
reverse mortgages. From the way they make it sound, reverse mortgages
are a simple and straightforward way to eliminate monthly mortgage payments
and use the money saved to pay for other things. But many people do not
fully understand exactly how this type of loan will affect them in the
long run, and end up signing up for something that really isn’t
the best option for them. Below is what you should understand about reverse
before you sign up.
How Reverse Mortgages Work
Reverse mortgages are loans available to adults over the age of 62 which
allow a person to borrow against the value of their homes. The debt does
not have to be paid back until the borrower either moves out of their
house or passes away. In the former case, the payment will be taken from
the proceeds of the sale of the home, and in the latter case, the repayment
will be taken from the borrower’s estate. While a reverse mortgage
can be helpful as part of a strategic financial plan, it can also lead
to disastrous consequences. There have been a number of stories in which
people have taken out reverse mortgages without fully understanding how
the loan works, and later losing their homes because of it.
If you are considering a reverse mortgage to free up needed funds, you
should know the following:
- Unlike a traditional mortgage, in which interest is paid monthly, interest
payments add up over the life of a loan in a reverse mortgage. When the
borrower moves out of their home or passes away, the amount of interest
accrued over time may “eat up” the remaining equity in the home.
- With reverse mortgages, borrowers still own their home and must use it
as their primary residence. The bank simply places a lien on the property
and has first claim to the proceeds when the home is sold.
- Reverse mortgages can be helpful for seniors who want to avoid selling
off other assets to cover unexpected expenses. However, this should be
a family decision, as it will affect the value of their estates and any
inheritance they may wish to provide to heirs and beneficiaries.
Schedule a Free Legal Consultation Today
Reverse mortgages aren’t right for everyone, and you should never
feel pressure to take one out. We advise you to seek legal counsel before
making any decisions, especially with so many scammers preying on senior
citizens. If you are looking into a reverse mortgage as a possible way
to free up funds and pay down debt, please contact a Dallas attorney at
Allmand Law Firm, PLLC. We can help you understand all of the pros and
cons of this type of loan and whether it is a smart financial move for
you. If there are better options available, we can discuss these as well.
We have more than two decades of experience and look forward to assisting you.
Allmand Law Firm, PLLC is happy to offer
free consultations. Request yours when you call (214) 884-4020.