Considering a reverse mortgage? Better check it out carefully before you sign; pitfalls and scams abound and the elderly are usually the victims.
Until around 2002, we didn’t see very many reverse mortgage products. A reverse mortgage is similar to a home equity line of credit; it taps into the equity that has been amassed in a home usually over a long period of time. Often, an older person or couple may own a home free and clear after paying a mortgage off on their home. To qualify, you must be over 62 years old, live in your home, and have no other loans or mortgages on the home.
Consumerlaw.org describes the process this way:
“In a reverse mortgage, a lender gives you money in exchange for a mortgage against your house. That money may come in a lump sum in monthly payments for as long as you live in your house, in larger monthly payments for a set time period, as a loan commitment that you can call upon in the future, or in some combination of the above.
The lender’s mortgage on your house generally can’t be exercised until you die or move out. In the meantime, you get to stay in your home. You keep the title. And the lender can’t seek repayment by making a claim against your other assets. Those are the good parts of a reverse mortgage.”
However, reverse mortgages are very pricey. It is not unusual for the costs and interest to greatly exceed other types of loans. Also, it is an area full of predators and scam artists looking to take advantage of elderly folks. Some of the marketing is very questionable; luring seniors into these loans to buy luxury items and implying they are a type of government stimulus plan. Reverse mortgages should only be considered after careful investigation and review. It’s best to hire a lawyer to look over any documents before you sign. As always, buyer beware!
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