The Common Pitfalls of Reverse Mortgaging Your Aventura Real Estate Home
If you’re thinking of retirement, the best way to come up with a financial cushion is to buy an investment property. But with the current market, investing on a property can carry tremendous risks. In order to ameliorate your future plans and safeguard your initial investment, taking out a reverse mortgage might be a possible option. Yet before you decide to do so, make sure you know the common disadvantages associated with reverse mortgages.
Lender fee
The high cost of the lender fee is one of the unfavorable pitfalls of reverse mortgaging your Aventura real estate property. While it is oftentimes beneficial to use your home equity, you still need to think about the expenses you pay for the transaction. Typically, lenders require an origination fee of as much as 2 percent of the amount.
Although you have the option to include this amount in the fee and pay it back slowly, doing so would not let you escape the interest rate, which increases with the inclusion of the origination fee.
Interest rate
It is indeed helpful to take out a reverse mortgage on your Aventura real estate property if you’re planning to have a steady cash flow after retirement. On the other hand, since this is essentially still a loan, you have to repay it with interest. Once you plan to purchase an investment property in the future, the reverse mortgage you have may turn into a wall that will block you from the financing you require. Since you’ve already taken out the reverse mortgage, you cannot tap into your home equity further to complete the investment purchase; and taking out another loan will definitely become too risky.
Medicaid
Taking out a reverse mortgage can also decrease or lose completely your eligibility for a Medicaid. You must realize that once you receive a lump sum amount due to the reverse mortgage, for instance, you have to spend it right away; otherwise that will be considered as an asset that can make you lose Medicaid eligibility. Even the money left from the lump sum will be taken into account.
Terms
Lastly, you must be wary of your reverse mortgage term. Like other types of mortgages, it is important to know that there isn’t any clause that can possibly make you lose your Aventura real estate property. Make sure you have understood all the terms before even signing anything.
Mark Michael Ferrer
Aventura Real Estate
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