Mar 14 2008
Reverse Mortgage Alternatives: Part 5
We’re talking about the answer to: “Why not do a traditional refinance and pull cash out?” For continuity, first see yesterday’s post on the same subject.
Since you make no payments on a reverse mortgage, you can't lose your home for missing a payment. Now that provides you with a bit more security than a traditional loan that requires monthly mortgage payments, don't you think?
Adding to that security is the fact that with the reverse mortgage, you will never be required to re-qualify for the loan. Now what does that mean? Here's a little-known fact: since traditional mortgages require that you qualify based on income, assets and credit, the bank reserves the right to periodically "check up" on you to make sure that you still qualify for the loan. If after a couple years, you have used up some of the money from your loan, or spent down a significant part of your other savings, the bank may close the loan and require immediate and full repayment. This is "calling the loan". And we all know what happens if you cannot afford to repay a mortgage to the bank. There also have been recent reports in the media of lenders taking away the homeowner’s HELOC without warning due to declining home values and equity.
Tomorrow will discuss another risk of the traditional mortgage as an alternative to the reverse mortgage.
