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The truth about reverse mortgages: Easy cash – or headed for a crash

April 1, 2017

by Bayview Hunters Point Community Legal

These days many seniors find themselves without enough to make ends meet. Then you turn on the TV and hear Robert Wagner, Pat Boone, Alex Trebek, Fred Thompson and even “Fonzie” telling us about the easy money provided by reverse mortgages. A reverse mortgage is a loan for senior homeowners, age 62 and older, that uses the home’s equity as collateral, before you take loan calculate mortgage payment. The loan generally does not have to be repaid until the borrowers move out of the property or pass away, and there is also the emergency cash approval same day loans that you see on the tv all the time.

You may think that if these celebrities stand behind reverse mortgages, the loans are OK. Look out: Reverse mortgages can be very dangerous. Loan brokers often target senior homeowners in minority communities who have low mortgages.

Reverse mortgages can be very dangerous. Loan brokers often target senior homeowners in minority communities who have low mortgages.

They smile and make the loan sound so good that you think you can’t pass it up. They tell you that you can put your home equity to work and that you should get some of the money you deserve. But, they may not be telling you the whole truth. Know the facts before you consider a reverse mortgage or you could end up without a home.

Facts about reverse mortgages

If you get a reverse mortgage you will not have to make monthly payments to the bank, but the bank expects to be paid back. If you or your heirs cannot repay the loan, including high costs, fees and interest YOU WILL LOSE THE HOME.

YOU MUST LIVE IN THE HOME. That may be easy now. What happens if you fall and break your hip? You are in the hospital for a few weeks and then go to a rehab facility. If you are away from your home for a period as brief as one month, THE BANK MAY FORECLOSE.

YOU MUST CONTINUE TO PAY TAXES, INSURANCE AND UPKEEP. Don’t think that you can get money out of your home and forget about making those payments. You are still responsible for the taxes and insurance on the property and for maintaining the property. That’s a monthly expense you need to think about before you get any reverse mortgage money and spend it. If you don’t pay the taxes and insurance and keep up with repairs, THE BANK CAN FORECLOSE AND PUT YOU OUT.

THE FEDERAL GOVERNMENT INSURES REVERSE MORTGAGES FOR THE BENEFIT OF THE BANK. The insurance pays the bank if the house goes into foreclosure and the sale of the property doesn’t cover your debt. The homeowner pays for the insurance, but the bank gets any insurance money.

REVERSE MORTGAGES MAY BE MORE EXPENSIVE THAN OTHER OPTIONS. The actors who sell these loans on TV promise easy qualifying and quick money, but these loans are expensive. A reverse mortgage is a loan and like any loan it carries fees and interest. The fees and interest on reverse mortgages are very high and will eat into the money you can get. Finally, after you pass away, if your heirs can’t repay the loan, fees and high interest, THE HOME YOU WORKED SO HARD TO KEEP WILL BE SOLD BY THE BANK.

As a senior, you have common sense and years of experience. Use that common sense when considering a reverse mortgage.

  • Do you need the money for something essential? Money for vacations, a fancy kitchen or kids and grandkids with their hands out is not essential. If you use up your home equity, it may not be there when you really need it.
  • Discuss the prospect of taking a loan with someone you trust.
  • Take your time. Be suspicious if you are being hustled to make a quick decision. If it’s real, it will keep.
  • If you have a financial need, look for ways other than a reverse mortgage to deal with the circumstances. There are less expensive alternatives, such as an equity line of credit.

Finally, the FBI reports that seniors who own their own homes are often the victims of financial fraud. Be suspicious if the loan broker who is offering a reverse mortgage asks you to sign papers you do not understand, asks you to give him or her power of attorney, talks about investments or suggests that he or she will find a contractor to make repairs to the property.

If you already have a reverse mortgage and have questions, you can consult with a lawyer for free. Please contact Bayview Hunters Point Community Legal, 4622 Third St., San Francisco, CA 94124, 415-735-4124, info@bhpcommunitylegal.org.

To learn about more ways to tap your home equity, read “Reverse Mortgages and Their Alternatives” and “Home Made Money: A Consumer’s Guide to Reverse Mortgages.”

10 thoughts on “The truth about reverse mortgages: Easy cash – or headed for a crash

  1. Eric Olsen

    It is distressing to read an article with so much misinformation. It is a complete disservice. I am the executive director of a nonprofit law firm that helps seniors with financial problems. I do not sell reverse mortgages or profit in any way therein. I have been an attorney for nearly 40 years. I hope whoever wrote this article will read my comments.Just how do they target people in low income communities? Like a reverse is a crime, let alone that they target any specific group. The "facts" stated are very misleading. Probably the number one reason lower income seniors get a reverse is to eliminate a house payment so they can afford to stay in their home for the rest of their life. Of course any money borrowed will need to be paid by sale of the home after death of the homeowner,. So exactly how will the person getting the reverse LOSE THE HOME? Doesn't make sense because it is not true. Maybe the heirs after the homeowners death if the home goes down in value but not the homeowner unless their ghost resides in the home. True you have to maintain property taxes and insurance- but that will be far less than the mortgage payment the seniors was paying and often a set aside is made so the property taxes and insurance are paid from the reverse- then the homeowner pays nothing, True there are expenses with a reverse but they are paid from the loan proceeds. The persons that are affected are the heirs- they get a smaller inheritance but mom and dad get to stay in the home and have more money to pay for their needs. What child doesn't want parents to be comfortable in thier elder years? Being rushed or asked to sign papers you don't understand? Boy does this reveal the author is ignorant of the facts. Part of the reverse process is a the requirement of a counseling session of about an hour by an independent counselor specifically about reverse mortgages and how they work. You can't "rush" a reverse. Then talking about the FBI and financial fraud in the same breath. Authors should write on topics with which they are familiar not invent so called facts. True, reverse mortgages are not for everyone, but they are a godsend for many lower income seniors who otherwise would not be able to keep their homes or make a payment and live in utter poverty in their seniors years. Eric Olsen Executive Director HELPS Nonprofit Law Firm

    Reply
  2. Georgia Schofield

    A reverse mortgage is great or terrible in view of the budgetary condition or circumstance of the seniors. In the event that the seniors are having money related challenges, this may be a guardian angel and cause less anxiety Essay Help UK -Essay Star. In the event that they are in a decent money related condition and have arranged well for retirement there is no requirement for a reverse mortgage. The essential necessity to acquire a graduated home buyback is that either of the seniors must be at least 62 years old. A graduated home buyback is kind of costly to get, so one of the primary things you would need to do is discover the cost of your getting this reverse mortgage. You would likewise be required to get and pay for a FHA examination. All repairs to the house found by the appraiser should be repaired preceding the reverse mortgage endorsed and shutting.

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    Really great post. This answered the majority of my questions. When I read this I actually opened up a word document and started taking notes haha.

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    The basic need to obtain a graduated home buyback is that both of the seniors must be no less than 62 years of age. A graduated home buyback is somewhat exorbitant to get, Essay Writer UK so one of the essential things you would need to do is find the cost of your getting this home buyback. You would in like manner be required to get and pay for a FHA examination. All repairs to the house found by the appraiser ought to be repaired going before the graduated home buyback embraced and closing.

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