Have you ever heard of a reverse mortgage?
Reverse mortgages are available to homeowners aged 62 or older.
In a traditional mortgage, you make payments to a loan company. In a reverse mortgage, you receive payments from a loan company but continue to live in your home. When your home is sold, either when you choose to leave or after your death, the loan company is repaid out of your equity.
There are many benefits to reverse mortgages:
- A reverse mortgage allows you to stay in your home and receive payments for the equity of your home.
- Income from reverse mortgages is not taxed, so you will have more money to meet your expenses.
- A reverse mortgage can also help protect your home from creditors.
However, reverse mortgages have some drawbacks.
- It costs a lot to get a reverse mortgage.
- If you apply for a federally-insured reverse mortgage, you will be required to meet with a counselor who will explain the impact the loan will have on your finances and also discuss other alternatives with you. This counseling meeting will cost about $125.
- Private reverse mortgages are also available, but some of these companies require counseling as well.
- In addition to counseling, there are closing costs and other fees to pay when you get a reverse mortgage.
Be careful when you are considering a reverse mortgage, because there is a lot of fraud surrounding reverse mortgages. A common type of reverse mortgage fraud is known as “foreclosure rescue.” People committing this type of fraud will tell seniors that a reverse mortgage can save their home from foreclosure, but then tell the seniors they don’t qualify for the reverse mortgage.
Instead, they offer the seniors a different mortgage type, which actually transfers the property from the ownership of the seniors to the thieves.
To avoid being scammed, the FBI recommends that you never respond to a reverse mortgage offer that you did not request yourself. If you believe someone has been attempting to scam you with a reverse mortgage, you can file a complaint with the Federal Trade Commission here.
Reverse mortgages can be good, but they are not for everyone, and it’s important to make sure you are dealing with people you can trust. We can help you determine if a reverse mortgage may be right for your situation. Call 855-269-2889 for your free, confidential, no-obligation phone consultation.
This article was originally posted as “Should I Get a Reverse Mortgage.”