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Reverse Mortgage

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Top 10 Disadvantages of Reverse Mortgages

I get the question a lot from prospective borrowers, "What are the disadvantages of a Reverse Mortgage?" It is a very easy question to answer because there actually are a few.

Reverse Mortgages & Annuities

While I agree that a reverse mortgage is not right for everyone, I also see evidence that only a small number of homeowners trust them or the potential opportunities they create. Not everyone uses them to pay off bills or help out a friend.

Dumbing Down Loan Officers

Loan officers have long enjoyed the potential to make a substantial income in the mortgage industry. The job usually does not require a college degree, just a burning desire to succeed. We loan officers have been long criticized for the way we are paid and we are accused of abusing customers by selling loans for the benefit of compensation rather than what’s in the best interest of the borrower.

Dumbing Down Loan Officers

Reverse Mortgage counseling has taken another turn in the wrong direction in my opinion. The counselors now wield more influence over the borrower’s ability to get a reverse mortgage, whether or not they are qualified to do so. During the process of reverse mortgage counseling, counselors are required to give a pass/fail exam to the borrower who may or may not receive the certificate and may or may not pass go to get the reverse mortgage. If the borrower does not demonstrate basic knowledge then the certificate is not issued. Here is my problem with that.

Lowest Reverse Mortgage Fees

Reverse Mortgages have come a long way in just the last year or two. The low, fixed interest rate, FHA insured reverse mortgage came on to the scene last year and has taken the industry by storm. This is good news for everyone, including homeowners age 62 and older.

With a very healthy secondary market for these loans, lender premiums have increased to the point where it just made good sense to use these credits to pay borrower fees and closing costs. Fees and costs have long since been one of the major deterrents to the program for some and others just would not qualify for the loan without lenders picking up the tab for some of these fees.

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