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Top 10 Disadvantages of Reverse Mortgages

By On July 13, 2010

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 are Home Equity Loans and they will reduce the amount of equity you have in your home.

If you are in the market for a Reverse Mortgage, you probably are not trying to preserve long term equity, so this may not be a specific concern.

  • Reverse Mortgages are currently insured by the Federal Housing Authority (FHA) so the collateral for the loan, your home, must meet the HUD minimum property guidelines.

This is particularly difficult in some instances such as with mobile homes and condominiums.

  • Reverse Mortgages are difficult to obtain if your loan closes with your property in a trust.
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