Reverse Mortgages: Is it the right choice for you and your family?
What is a reverse mortgage?
Homeowners age 62 or older whose homes carry little or no mortgage debt are eligible for a specialized loan called a reverse mortgage. It is a loan against your home that converts a portion of the equity in your home into cash. Generally, you do not have to pay it back for as long as you remain living in your home and keep current on your tax and insurance payments. You can never owe more than your home’s value.
The amount you can borrow depends on your age, the current interest rate and the current appraised value of your home. In most cases, the more valuable your home and the older you are, the lower the interest rate is and the more money you can borrow.
What are the problems with reverse mortgages?
Lenders charge homeowners very expensive origination fees to obtain a reverse mortgage. When a borrower dies or moves out, the loan must be repaid. Surviving family and heirs may lose title to the home. For low income seniors who rely on public benefits, a reverse mortgage might make you ineligible for services such as food stamps and Medicaid or Supplemental Social Security Income.
Seniors from all across the country have been cheated by unscrupulous lenders and third-party estate planning firms who lure homeowners with unfair or unlawful contract terms. For example, beware if a mortgage consultant or broker insists that a home needs costly renovations, and requires a specific contractor to do the work.
For more check out the rest of our brochure entitled "Reverse Mortgages: Is it the right choice for you and your family?"