Here’s how lenders get their money back on reverse mortgages: As long as you keep paying your property taxes, homeowners insurance and other expenses related to your home, you won’t owe the mortgage company anything while you still live in your home. After all, they’ve got to make money somehow. You may not have to make monthly payments, but you have to pay the lender back eventually. But remember: We’re still talking about a loan here. Along with the qualifications we just went over, lenders will evaluate your finances to make sure you can afford to pay for other expenses you’ll still be on the hook for, like taxes and insurance.Īlso similar to a traditional mortgage, homeowners who take out a reverse mortgage put up their house as collateral for the loan-that means you lose your house if you don’t live up to the terms of the loan.Ĭan we talk for a second about how risky that is? Why in the world would you want to risk losing your home-the most valuable thing you own-in your senior years? And talk about stress! Try getting a good night’s sleep when the future of your home is up in the air.Ĭompanies who offer reverse mortgages will really play up the fact that if you take one out, you won’t owe monthly payments. Getting a reverse mortgage works like a regular mortgage-you apply and then wait for the lender to approve you. Additionally, borrowers can’t have any outstanding federal debts, like unpaid taxes. Similar to a traditional second mortgage, a reverse mortgage allows eligible homeowners to access their home equity (the value of their home minus what they still owe) in the form of either a lump sum, a line of credit or fixed monthly payments from the lender to the borrower.īorrowers can only get a reverse mortgage on a single- or multi-family home (or condo) no bigger than a fourplex that serves as their primary residence. The further we dive in, the more you’ll see how a reverse mortgage is nothing more than a predatory program designed to take advantage of you.Ī reverse mortgage is a type of mortgage that’s only available to homeowners aged 62 or older who have already paid off a good chunk (or all) of their home’s existing mortgage loan. Why are reverse mortgages so bad? Let’s take a look by answering some key questions like, What is a reverse mortgage? and How do reverse mortgages work? Here’s what the National Consumer Law Center had to say about reverse mortgages in a 2023 report: “The program was designed to allow older homeowners to borrow against their home equity without the risk of displacement, but reverse mortgages end in foreclosure much more often than they should.” 1 Reverse mortgages sound like a good plan-after all, who wouldn’t want a dream retirement funded entirely by their house! But here’s the truth: Reverse mortgages are major rip-offs.Īnd you don’t have to take our word for it, either. Thinking of getting a reverse mortgage? Bad idea.
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