The Reverse Mortgage: A Wolf in Sheep's Clothing
Some people try to live off of their Social Security income, but a lot of people aren't willing to give up the luxuries that they've been able to have when they did have an income, so they look for other options. Some people choose to work in a part-time job for extra income, but there are those who think that they should be able to retire regardless of whether or not they did a good job saving for retirement or not. In most cases these people borrow money to finance their lifestyle, and one of the growing ways to pay for life throughout one's golden years is through what is called a reverse mortgage. They're some of the worst financial products on the market, and you should avoid them.
Essentially, a reverse mortgage is a loan which is available to senior citizens (people of age 62+ in the United States) that is used to liquidate the home equity the person has, but allow them to stay in the home until they sell it or pass away. Typically the loan money taken through a reverse mortgage comes on a monthly basis, but there are also instances where a lump sum is given. The borrower won't make any payments until he/she moves or dies, but when the person is no longer in the house, the balance will be due in full.
The idea of creative financing seems like a reasonable and creative way to pay for one's retirement until you look at it a little bit deeper. When you look at the numbers of a reverse mortgage, you'll find that the fees and interest rate are some of the highest available on the market for any type of mortgage. Chances are you're a lot better off just getting a regular mortgage if you think you must absolutely borrow money on your home to live.
There is also a lot of fraud in reverse mortgages. Senior citizens have long been preyed upon for financial scams; often time's senior citizens could be on the very raw end of a deal and have their home taken from them! You personally might not be hit with some sort of reverse mortgage fraud, but given that this is a very highly targeted method of taking money from seniors, one shouldn't even bother risking it.
Reverse mortgages are never a really desirable option. If the only wealth that you have is your home equity, it might just be time to sell your home. Most seniors will never do this because they are unwilling to face the reality that they cannot afford their home, and instead will try to keep up their lifestyle by borrowing money, because it's the seemingly easy way out. Of course in doing so you're throwing money away in fees and making sure that your family does not have any sort of inheritance!
It's time to face the facts, if you find yourself in such a situation, you really can't afford to retire. Take on a part-time job for some extra income, and consider moving into a smaller house or into a nice apartment, because as you get older, you really won't be able to keep the house up and too much of your life will be invested in one piece of property. Stay away from reverse mortgages, they're not the answer.
Published by Matthew Paulson
I am a very busy undergraduate, I'm involved with nine different campus organizations and work five different jobs. Most notably, I am the editor-in-chief of DSU's Trojan Times. View profile
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- Reverse mortgages have some of the highest fees and interest for any type of mortgage
- The amount of fraud in reverse mortgages is staggering.
- Why would you go into debt at that age in life?!
6 Comments
Post a CommentUntil you are in the position of losing your home and not having the income or means to remortgage all that you say is hogwash.
Mike, it sounds like YOU work in the reverse mortgage "industry." You've written a not-too-convincing advertisement for them.
This article is obviously an opinion piece. It does not back these statements up with hard facts. Yes, fraud exists. Find any investment/financial field in which NO fraud has ever occurred, and you will have found a financial field that doesn't exist.
In response to the comment posted by 'Paul Tollison' it appears, without having access to the original lending documents, the attempt is/was being made to change the terms/conditions of the reverse mortgage, which in a normal lending environment would mean refinancing.
How stupid are we? The same institutions that have brought us the home price crash, the failure of banking and the recent collapse of the global economy and Wall Street now bring us the Reverse Mortgage! They must be licking their chops because seniors who have lost stock value will now " need" to flock to them.
Liberty Reverse Mortgage is Sacramento has the same "compliance officer" that Quickloan had. Compliance my foot! Why isn't she in jail or prohibited from working in this sector?
These instruments exist to make the crooks richer. You don't win with a reverse mortgage just like you didn't win with " teaser rates" and " interest only" loans. In the end they win everything and you and your family lose. There are so many more options.
I hope the state and the feds will crack down on this before even more families and more homes are put at risk. I believe the positive comments above are from people in the industry. Lets get smart and take care of this.
You are mistaken if you think seniors can have their homes taken from them as you bluntly put it. Reverse mortgages are considered the safest of all mortgages and they are highly regulated through HUD and the FHA. The only way to lose your home is through a tax foreclosure when one opts to neglect paying property taxes which can happen whether or not one takes a reverse mortgage. You also incorrectly state that "reverse mortgages are never a really desirable option" . Fact is, reverse mortgages are a truly desirable and helpful option for many seniors that become financially strapped and are in need of supplemental income. Lastly you are again wrong in claiming that the family will not have any sort of inheritance. WRONG. I would suggest that you educate yourself on reverse mortgages and get all of the facts before spouting off misconceptions and false generalities.
i took a reverse mortgage from financial freedom, san francisco, after taking 13 months of payments they are dragging their feet about paying the remaining equity as a lump sum. paul t