what is the down side of a reverse mortgage?

It Seems Complicated: A Reverse Mortgage is a mortgage in reverse – that can be hard to get your head around. With a traditional mortgage you borrow money up front and pay the loan down over time. With a traditional mortgage you borrow money up front and pay the loan down over time.

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A reverse mortgage cannot go upside down. The cost of the FHA mortgage insurance is a one-time fee of 2% of the appraised value of the home, and then an annual fee of 0.5% of the outstanding loan balance. Specific rules for reverse mortgage transactions vary depending on the laws of the jurisdiction.

Since a reverse mortgage is a loan, and the borrower is not making payments on a monthly basis to pay back that loan, interest continues to accrue which INCREASES the balance of the loan. That is why it is called a "reverse" mortgage, the balance is going up not down.

A Home Equity Conversion Reverse Mortgage (HECM), more commonly known as a reverse mortgage, is often used as a means of income for retirees. For those age 62 or older, these loans can provide.

The biggest downside of a reverse mortgage and which probably causes the most confusion and misunderstanding is when the mortgaged property goes "upside down." That means, as time goes by, the borrower reaches a point where he or she owes more money than the house is worth.

fha loans with no money down FHA does not allow home buying with no down-payment any more. It would take you a very long time to find a loan company offering home loans with no down-payment in today’s risk lending market. However, if you are a military veteran you can buy a home with no money down under the VA loan program.

Reverse mortgages also have disadvantages. If you die, the loan balance will come due immediately. The house is sold but, if the loan exceeds the value of the home, the balance is due from your estate.

Negative aspects of reverse mortgages. Among the negatives of a reverse mortgage are the costs involved. All mortgages have costs, but reverse mortgage fees, which can include the interest rate, loan origination fee, mortgage insurance fee, appraisal fee, title insurance fees, and various other closing costs, are extremely high when compared with a traditional mortgage.

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So what is the downside of reverse mortgages? Well, here are a few possible downsides I can think of: 1) You will likely leave less (or perhaps zero) home equity to your heirs. I’m not sure this is truly a downside of reverse mortgages per se, because the whole purpose is to convert home equity into cash.

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