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Antonio Said:

Are reverse mortgages a scam?

We Answered:

If there is no benefit for the person who has a reverse mortgage, it's a scam.

Dwayne Said:

Do you think reverse mortgage is a scam?

We Answered:

it's a tricky deal and requires some very careful and detailed thinking.

i've seen a few offers -- they're complex beyond what most Americans can understand, imho. for that reason alone, i suggest that they not be done unless there's no other choice at all. [my experience is that the trickier the deal, the more ways there are for the bank or dealmaker to win bigger than it ought].

I do understand that leaving the home may not be a good decision for some elders -- Alzheimer patients do a LOT better if they do not move [and the estimated proportion of elders who will get Alzheimer is about 25% and apparently growing].

still, i think it would be much better if the family can come together and buy the house from Mom and Dad on a life estate deal [Mom and Dad live there while they can and the family buys the house from them over time with the usual deed and mortgage -- Mom and Dad hold the mortgage and the payments are their funds to spend].

Also, it costs the family very little to redo such an arrangement if needs change suddenly for any of the various reasons that happen to elders.

of course, this only works if the now adult children are reasonably successful themselves; and, multi-generation families living together was the human norm in every society before about 75 years ago. such extended families living together are still the norm in virtually all second and third world countries -- and who's to say that they aren't happier than our alone and stranded elders?

Anita Said:

Soo, what is a reverse mortgage?

We Answered:

It's a home loan for folks 62 and older for their primary residence. The reverse mortgage provides access to a portion of the homeowner's equity without having the burden of monthly repayments (hence the term "reverse" mortgage).

Interest and mortgage insurance is added to the loan balance every month, so the balance owed increases. The homeowner can always make payments on the loan to bring the balance down, but it is not required. The advantage is there are no monthly payments required. The disadvantage is that there will be less equity to pass on to the heirs.

The majority of these loans are FHA insured, and they are very safe. The bank and the government do not own the home, the homeowners do, and are still responsible for the property taxes, homeowner's insurance and the general upkeep of the home.

The homeowner can still sell the home whenever they like, pay back the reverse mortgage and keep the remaining equity as they would if they had a traditional mortgage. When the homeowners pass away, the home goes to the estate (heirs), and they can either refinance the loan into their own name or pay off the balance in full to keep the home, or do what most heirs do, which is simply sell the home and keep the remaining equity. If the property is "under water" (owe more on the balance than what the home is worth), the sales proceeds will be used to pay the loan back, and the bank will file a claim with the FHA for the remainder balance owing. No personal debt is passed on to the heirs, and the banks do not come after the heirs for the shortfall, that is why there is FHA insurance on these loans. Without the FHA insurance, no bank today would make these loans available.

The amount of equity available to the homeowners is based on the home's value (up to $625,500), the youngest borrower's birth date, and the interest rates. The home does not need to be "free and clear." The vast majority of homeowners use the reverse mortgage to retire their current mortgage.

The loan is popular among senior homeowners because there are no credit score, health, assets, or employment requirements.

There are a few options available to choose from, including fixed rates and adjustable rates, and a new "Saver" reverse mortgage with closing costs similar to that of a regular mortgage (@ $2,500). There are advantages to each option, so be sure to speak with someone who will thoroughly go over all the options available.

I recommend talking to a reputable bank who has someone who specializes in these reverse mortgages. There is also 3rd party counseling required on these types of loans. The counseling is there so the homeowner can be informed about all the options available, they'll go over the reverse mortgage in detail and what the responsibilities of the homeowner are going forward, and the homeowners can ask questions from a party not affiliated with the loan transaction. I recommend having the children, financial advisor, or elder law attorney part of the counseling session.

I do presentations on reverse mortgages almost every week, and I welcome any further questions: davidvdw@yahoo.com.

Denise Said:

Did You Know The Reverse Mortgage Is A Scam?

We Answered:

That is why when someone is making this large a purchase, they need to understand what they are doing or hire someone that does. =8-D

Minnie Said:

I Just Saw Robert Wagner Pitching a Reverse Mortgage By the "senior Lending Network, I See this as a Scam.

We Answered:

That thing had me baffled also, I read the fine print, and the finer print that was after the really small print and could not see one paragraph that a normal human could understand. Far as I can make out, you sell them your house and land, and they give you chump change, then after your dead they take over. Or your relatives have to pay some idiotic % and fees and junk.
Its a good scam, I gotta admit. Its almost as good as the I can give you the secret on how to cut your golf par in half. GARUNTEED!
Play every other hole.

Deanna Said:

Are reverse mortgages any good or are they scams for elderly people?

We Answered:

I have read extensively on the subject after parents thought about it.
The idea sounds nice, get paid each month from your home.

Someday you'll move out.
You may be 70 and not want to cut grass anymore, or injure a hip and end up in a wheelchair and want to move out.
When you move out - you'll have nothing to your name - nothing.
Nothing to pass on to your children - children like a little incentive to take good care of you.
The costs of these mortages are high - if not outrageous - people don't seem to look at them.
It's a loss - loss situation.
Especially if you think you will ever move out. Which again, 90% of the people do.

It is only good, if you are in a bind, and have no children.
But a better solution - always better:
Is to sell your home - and move to a cheap apartment.
And live happy with the cash you made from the sale of your home.

Google "reverse mortgages warning"
or reverse mortage cons
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