Reverse Mortgages – The Slippery Slope

Reverse Mortgages – The Slippery Slope

Reverse mortgages are a type of loan where instead of you having to pay the lender, lenders pay you – either over time or as a lump sum. How much you get is based on the valuation of your real estate in Las Vegas, and as you continue to receive more and more, these amounts get added into the loan balance.

However, the issue here is that interest is always charged on the outstanding balance. This means that even though you aren’t receiving payments anymore, the loan balance will continue to increase; which effectively means that even if you do not receive any further payments from your lender, the loan balance continues to increase.

There are 6 different types of reverse mortgages to consider:

  1. Lump sum reverse mortgage
  2. Equal monthly payments  or annuities
  3. Term payment mortgage
  4. Line of credit
  5. Equal monthly payments plus a line of credit
  6. Term payments plus a line of credit

If a lender is unwilling or unable to make payments due in a reverse mortgage made under any Federal Housing Administration (FHA), the government steps in to make said payment.

A reverse mortgage seems to be a very viable option for those aged 62 or older. It is a great way to get cash from your home equity [h1] – particularly if you failed to set a good retirement plan in place. You get to keep your cake (your home) and eat it, too (live in it).

However, this also means that you will be spending a significant amount of said equity on interest and loan fees. Furthermore, you won’t be able to add the home into your legacy plans to pass it on to your children. In our opinion, reverse mortgages are only worth the hassle if they result in a long-term financial solution – not short-term.

You may even find yourself outliving the mortgage proceeds. This is quite common when people choose to get a lump sum payment plan or a limited line of credit.

When considering whether you should go for a reverse mortgage or not, it is paramount that you discuss your options to the fullest with the right set of people. Chances are that you might be headed for a disaster.

If you are looking for experts to advise you on mortgages and reverse mortgages for luxury real estate in Las Vegas (whether or not it is a slippery slope for you), let the Vegas Group help.

Disclaimer: There are numerous factors to consider in every investment, including real estate. The information provided above is just a matter of opinion and can change with time. It shouldn’t be construed as legal or tax advice; neither does the report constitute a financial promotion or investment advice. It is general information and before making any such decision, you should seek out licensed professionals and see all ends clearly.