After reading a New York Times article on reverse mortgages and what can happen when an individual, usually an elderly person, purchases this kind of mortgage, I decided it was critical that I inform anyone reading this blog about this kind of mortgage.
The article points out that there are many instances where the reverse mortgage is so complicated that over a period of years, the elderly person can lose everything. Let’s keep in mind that this type of mortgage is one of a few ways a senior can access wealth, actually a loan on the equity in their home while still living in their home for as long as they wish.
What a person should know about this type of mortgage is that there are high fees, that it can be very expensive when compared to other loans and if the individual needs only a short term loan, he or she is better off considering another type of loan, possibly a home equity line of credit.
The article points out that anyone who is going to live in their home for less than seven years should not take out a reverse mortgage. And please note, the amount owed, grows over time and may ultimately reach an amount that is more than the house is worth.
The article also points out that the field is ripe for unethical and high-pressure sales tactics. So beware, since reverse mortgages are complicated and difficult to understand, please make sure your relatives who might think this is a great way of accessing their wealth, are appropiately educated. And please talk to an indpendent advisor before and after you speak with an agent. And do seek out AARP’s reverse mortgage education program which is 800-209-8085.