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What You Need to Know About Reverse Mortgages

Posted By Allmand Law Firm, PLLC || 12-Apr-2016

Chances are you’ve seen the commercials on television advertising reverse mortgages. From the way they make it sound, reverse mortgages are a simple and straightforward way to eliminate monthly mortgage payments and use the money saved to pay for other things. But many people do not fully understand exactly how this type of loan will affect them in the long run, and end up signing up for something that really isn’t the best option for them. Below is what you should understand about reverse mortgages before you sign up.

How Reverse Mortgages Work

Reverse mortgages are loans available to adults over the age of 62 which allow a person to borrow against the value of their homes. The debt does not have to be paid back until the borrower either moves out of their house or passes away. In the former case, the payment will be taken from the proceeds of the sale of the home, and in the latter case, the repayment will be taken from the borrower’s estate. While a reverse mortgage can be helpful as part of a strategic financial plan, it can also lead to disastrous consequences. There have been a number of stories in which people have taken out reverse mortgages without fully understanding how the loan works, and later losing their homes because of it.

If you are considering a reverse mortgage to free up needed funds, you should know the following:

  • Unlike a traditional mortgage, in which interest is paid monthly, interest payments add up over the life of a loan in a reverse mortgage. When the borrower moves out of their home or passes away, the amount of interest accrued over time may “eat up” the remaining equity in the home.
  • With reverse mortgages, borrowers still own their home and must use it as their primary residence. The bank simply places a lien on the property and has first claim to the proceeds when the home is sold.
  • Reverse mortgages can be helpful for seniors who want to avoid selling off other assets to cover unexpected expenses. However, this should be a family decision, as it will affect the value of their estates and any inheritance they may wish to provide to heirs and beneficiaries.

Schedule a Free Legal Consultation Today

Reverse mortgages aren’t right for everyone, and you should never feel pressure to take one out. We advise you to seek legal counsel before making any decisions, especially with so many scammers preying on senior citizens. If you are looking into a reverse mortgage as a possible way to free up funds and pay down debt, please contact a Dallas attorney at Allmand Law Firm, PLLC. We can help you understand all of the pros and cons of this type of loan and whether it is a smart financial move for you. If there are better options available, we can discuss these as well. We have more than two decades of experience and look forward to assisting you.

Allmand Law Firm, PLLC is happy to offer free consultations. Request yours when you call (214) 238-9608.

Categories: Loans / Mortgages
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