As defined in the previous post, reverse mortgages are loans converted from home equity that you won’t have to pay back until you die or move out. It is a means of a way out for cash-strapped seniors to get some needed cash. But with the real estate market falling, these loans are risky proposals to borrowers right now.

When allocated for the right reason and needs, reverse mortgages can be an effective way to supplement one’s income. But they are not free from its disadvantages like expensive fees and a number of occurrences of fraud.

Before you advance in taking a reverse mortgage consider these: First the bank expects you to maintain the house. That is their investment after all. You are then expected to pay for whatever maintenance the house will inccur over time.

Second, there are fees to pay. Right now Housing and Economic Recovery act has capped the origination fee at $6,000 per loan. You’ll pay standard closing costs and a mortgage insurance premium fee, which is another 2% of the home’s value. On top of that, you’ll pay a $30 to $35 monthly servicing fee for mortgage insurance. That’s a lot of fees to think about. Should I Refinance home

Third, occurances of frauds. For example, an agent advises you take a reverse mortgage to invest in a portfolio that won’t begin payments for years. There by burdening you with aforementioned fees.

In conclusion, with the current downturn in market, it is the best and wise choice to consider other alternatives than taking a reverse mortgage. It is still best to consult a financial advisor.

Related posts:

1. Are reverse mortgages different than home equity loans?

2. Reverse Mortgages: Refinancing with These

3. Federal Reverse Mortgages

4. What is a reverse mortgage?

5. How to Refinance – Are Adjustable Rate Mortgages (ARM) Bad?