Are There Disadvantages To A Reverse Mortgage

April 8, 2012 | Author: | Posted in Finance/Loans

What You Know about Loans Provides Good Decisions

Centuries of living have indicated that loans are often required. Lenders have gotten a bad rap in written history as far back as Biblical times. People can protect themselves from involvement in a bad loan by awareness of procedures and practices if they need to borrow money.Generally, people think of two items, a home and a car, as the main reasons for loans. Many other events lead to borrowing money and bring to light the factors that affect each situation. Reviewing standard borrowing procedure is complicated enough without introducing less desirable methods involving more complications.

The convenience of using a credit card rather than cash or a debit card encourages buyers to purchase more of the things they want instead of recognizing the purchase as the result of a loan. It is so easy to present a credit card, sign approval for the costs and authorize the bank to pay that it is not obvious it is borrowed money. Pulling the credit card out and purchasing something online, such as airline tickets, falls into the same category.Using the card results in money due for a service. It is a surprise to consumers finding out credit card fees and interest charges for purchases.

Reverse Mortgage

Another mortgage that has been growing in acceptance is the reverse mortgage. Use it to buy a home, or for a re-finance. One reason that it is so popular at the moment is because you dont have to make monthly payments for as long as you live in the residence. And this makes your pension dollar stretch just a bit further.

As tempting as it is to access a quick cash loan from your credit card, extra fees and higher interest are some of the probable results. Look over the statements for each card, determine which have the highest interest and pay as much above the minimum payment as possible.The minimum monthly payment usually covers the interest, while the principal remains untouched.

The best terms for credit card use go to those with impeccable credit rating and include benefits such as no annual fee.Enviable terms await those with great credit ratings. There are occasions when a needed item, such as a new washer or computer, is available with no interest as long as the monthly and total payments fall within the agreed parameters.Another program offers low, affordable monthly payments that pay the interest instead of the amount of the purchase.Unless the borrower is certain that payments towards the principal are within the budget, it is best to avoid interest-only loans.

No security is required for unsecured loans like personal and student loans. The downfall is that when payments fall behind, the credit union or bank can freeze the creditors accounts. Default results in the implementation of fees and additional interest, cancellation of the card and possible legal action.Most credit cards offer a cash advance feature without collateral and that risk is why interest is greater.

Secured loans, including mortgages, involve the promise of an asset, such as a car or house. The bank or note-holder can foreclose on the property to recover what is due.Some customers request a larger secured loan amount to pay off other high interest debts and allow more money each month for the new payment. It is tempting to pay the minimum payment, but wise to apply extra money towards the principal whenever possible. Secured loans cover recreational items, such as boats, RVs and snowmobiles, vehicles and mortgages. A well-known secured loan is the home equity loan. Repayment options for secured lines of credits include a payment amount towards just the interest.The usual day-to-day events are often covered through a companys line of credit.

Conventional loans are both secured and unsecured and some include a prepayment penalty. They include car, home equity and personal loans and have contractual repayment terms, including the payment date, interest amount and term of the loan. Two more recent types of loans are student loans that help with immediate educational assistance and payday loans that allow a temporary draw against an individuals next paycheck. Refraining from the urge to borrow against potential future income avoids financial problems down the road.

Theres a surprising number of people that think there are reverse home loan disadvantages. This helped me to choose an occupation that shows baby boomers how a reverse mortgage can really help them. Our entire website is dedicated to helping baby boomers understand this normally misinterpreted mortgage.

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