The con of reverse mortgages is in the very way that they are presented on business programs or other television programs in which the intended audience includes a significant amount of people that are both senior citizens and also have a good chance of owning their own home. These ads that are shown are not the quick cut and jerky motion that you come across in so many other advertisements that appeal to younger generations, but are instead carefully constructed with just the right music, a front pitchman, often recognizable to the audience as well as being a respected senior citizen, who carefully enunciates the value of the product using his sonorous voice of somber and dignified tonality.
The very first hint that all that you are seeing on your television is a con is how earnest that the ad is in its their pitch to senior citizens, as if, these pitchmen, who are strangers to your family on a personal basis, know what is best for you, when, in fact, they don't know anything about you whatsoever. Your house is often the biggest material asset that most people own, and because mortgages are initially sold with thirty-year payment terms, those that have reached their senior citizen years, frequently own their own home free and clear, and thereby have no mortgage payment. As a home owner, you are still responsible for property taxes, upkeep, and so forth, but the mortgage payments have ended, so all is good, except for one fundamental thing and that thing is that homes, unlike an investment in a bond, for instance, do not throw off any income in a given year, although home values may go up, there isn't any dividend being kicked out to the owner.
So then, enters the reverse mortgage pitch, able to sell their siren song, of monetizing your biggest asset, which, for many senior citizens has its place, especially when the income of senior citizens is minimal, because many do not work, and many do not have pensions or other reliable income generators, so an offer to get cash, up front, may sound quite enticing. The reverse mortgage pitch makes it sound even more palatable by stating that the loan taken out doesn't need to be paid back till you die, or move, or sell your home. It almost sounds too perfect, because the structure is setup to provide the money that you need to live on now, as well as your home is still yours to live in, too. Of course, there are many terms and conditions that might upset everything, with the most obvious one, being that when the last principle to the contract has died, the reverse mortgage loan must then be paid off in full, or the bankers will own the home.
Additionally, as in all mortgage or mortgage-like products, negotiation and understanding of what your financial obligations are is paramount. For instance, reverse mortgage terms are going to be variable and typically tied to some indicator with periodic rebalancing such as the LIBOR rate or they are going to be set to a firm fixed rate. Obviously, a fix rate makes it pretty darn clear about your monthly financial obligations, whereas the variable is almost always constructed in a manner to deceive buyers of the volatility of such, and is always written in a way to help protect and benefit banks over the long term, although sold to consumers as if by having a variable rate, it benefits them. The reason that the reverse mortgage terms matter is because upon contract completion, by your death, or similar, your heirs would prefer to have equity in the home, and therefore be able to benefit and inherit something, whereas the issuer of your reverse mortgage would strongly prefer to have it all.
If you are retired and own your home but are cash-strapped, reverse mortgages are probably not going to be your best choice, they may, however, be a convenient choice, but financially for your heirs, for your legacy, and because of the dicey terms and conditions of such, they aren't a good choice. Remember, banks are in the business of making money and vulnerable senior citizens with ready assets that can be exploited are a comfortable way for banks to make an easy killing.