A reverse mortgage is a loan available to those residing in Brooklyn who are over 62-years-old and looking to convert part of their home’s entity into cash. Instead of making payments to a lender, the lender makes payments to the borrower, reversing the traditional mortgage pay cycle and decreasing the home’s equity instead of raising it. Payments on the loan are not required until the borrower dies or the home is sold or otherwise vacated, allowing older citizens to use their equity during retirement. Although a reverse mortgage can provide some much-needed extra cash, they can also negatively affect the homeowner.
Reverse Mortgage Disadvantages
Due to the fact that reverse mortgages are aimed at retirees, they do not have income requirements, and therefore can come with higher fees and interest and can end up being extremely expensive. Although in some instances the price of the loan cannot raise higher than the price of the property, lenders are ultimately looking to make a profit- which isn’t in the interest of the lendee. A reverse mortgage could also ruin leaving the estate to an heir. When the property is sold, the borrower moves out, or dies, the full balance of the reverse mortgage can become due. When the property is sold, either before or after the borrower dies, the sale money can be used to pay off the loan, but leaves the property unavailable for any heirs.
Scams Associated with Reverse Mortgages
Finally, a reverse mortgage could land you in the middle of a scam and forced to put your home up for foreclosure. This kind of scams often develop when mortgage income is given to a third-party person who never pays the homeowner, ultimately driving the homeowner into filing bankruptcy.
While a reverse mortgage can help older Americans pay necessary medical bills or help fund a retirement plan, they are something to be cautious of. Individuals or families who may be facing bankruptcy due to their reverse mortgage should contact an expert Brooklyn bankruptcy attorney at Michael F. Kanzer & Associates P.C. We have helped hundreds of individuals discharge their debts by providing our clients with expert protection against Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy for more than a decade.