Mortgage? Reverse mortgage? Direct Reverse Mortgage? Name it and we will hand it to you in a silver platter. Yes, the business of loans in the Philippines is evidently taking the center stage now. For instance, reverse mortgage loan seems to be the perfect solution for a retiree with low monthly income, but take time to scrutinize this mortgage type of loan because you can easily see that it is not what it appears to be. For the elders, who usually have their houses as their only property, reverse mortgage loan is the solution. Reverse mortgage is one of the many types of loans in the Philippines that allow homeowners to borrow money from lending companies giving their houses as the collateral for the loan. In order to properly weigh in, whether to apply for a mortgage or not kindly check the several risks of reverse mortgages below.
Imagine how literally risky it is to carry your house at your back because of your reverse mortgage application and all those hidden and upfront costs.
Family Instability Issues when the Borrower Dies. When the borrower dies, the family can either continue living on that house still under a reverse mortgage loan or can pay for the accumulated mortgage by selling the house. The risk is the amount of the house may be lesser or just enough to pay for the mortgage that nothing may be left for the family of the borrower.
Fees. The scenario here is that, the lending company lends you a specific amount of money monthly based on the computed home equity. The real thing is this: while you are in a reverse mortgage, you will still spend on the maintenance of the house, property tax and home insurance. That’s a lot of money spent there from a loan intended to aid your monthly income.
Interest Rates. The interest rates of reverse mortgage loans are way much higher than any of the equity loans in the Philippines. Its upfront costs can increase immediately.
Variable Rates. The rates of reverse mortgage loans in the Philippines are directly affected by its economic status; thus, time will come that your mortgage rate is higher than the usual.
Exceeding the Equity Loan. There will be no more monthly money for you when you have reached the established home equity amount. You have no choice but to sell the house to pay for the mortgage.
Misdirected Mortgage Loans. A borrower applies for the loan in order to have enough funds during retirement. However, instead of gaining favors, the borrower will be bombarded with a lot of interest rates from the loan like insurance premiums and services fees.
More Complicated and Expensive. Considering the fees incurred before, during and after the reverse mortgage transaction, it appears that it is way too expensive for someone, especially to a retiree looking for something to augment monthly income.
Low Estate Value. Because you already spent your home equity, naturally your estate value deteriorates.
Loan Processing Fee. The lender can actually charge of a loan processing fee and that could mean an additional cost for a borrower like you. It is not going to be a small amount because it actually depends on the lender and the value of your home.
Fixed Loan Terms. In the latter part of the reverse mortgage loans, you realize to add for another borrower or lower the interest rate for your convenience. That is a big no because most lenders do not allow such arrangements.
Now is your only time to decide. Is reverse mortgage loans the answer to your problem or is it another problem coming to your way?
Maricor Bunal has been a Project Manager and Content Writer for a long while. Her passion in writing is her main drive in crafting articles that are engaging, informative, and meaningful. Her partnership with Loan Solutions PH has given her a whole new opportunity to take writing to a whole new level.