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| Question |
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Where can I find a list of horror stories about "Reverse Mortgages"?
my sister is trying to get my senior citizen parents involved in
what I view as a PREDATORY LENDING SCHEME otherwise known as a reverse mortgage.
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| By
ocean swimracer ray |
Posted on
12/02/09 Total Answers
5 |
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| Answers- |
| Thank you for being aware that reverse mortgages are another way banks are ripping off "not so smart" people.
I think that is the biggest, most significant mistake an adult can make.
You are always better off selling the home, and moving somewhere much smaller.
That way, when you are 80, you at least have something to your name when you decide to move out.
Google:
Reverse mortgages followed by the words complaints, rip-off, scam
Dave Ramsey has a good article to start at
http://finance.yahoo.com/focus-retirement/article/105419/Dave-Ramsey-on-Debt-in-Retirement?mod=retirement-post-spending
Please read this article first from yahoo finance
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| Answer by :
Judy On Date
2009-12-02 15:40:08 |
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| Well I am with you, I would do a lot of homework and make sure your parents understand, they should they pass, the house goes back to the bank, not the family. |
| Answer by :
Realtoratheart On Date
2009-12-02 15:40:32 |
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| a reverse mortgage is a fantastic program. you are only skeptical, because 'mom' is getting 'your inheritance'. take a closer look at what is better for mom, than you.
anyways.. yes loan program 69.. that is fantastic also. |
| Answer by :
TRIXIE.. On Date
2009-12-02 15:46:37 |
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| The Reverse mortgage leaves only one party satisfied.
Tell your Broker you want a 'Program 69' mortgage and both parties will benefit equally by sharing their main assets. |
| Answer by :
Love Hammer On Date
2009-12-02 15:53:16 |
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| Consumer Reports ran a LONG article on them. It's the September 2009 issue and yes, they hate them.
CR thinks the reverse mortgage industry is another meltdown waiting to happen.
The industry is insured by the federal government and yes, it's taxpayer money that's used when the borrower dies and can't pay the loan back.
CR blames complex contracts, outrageous fees and high interest rates.
The lenders have a cusy deal--the loans are guaranteed by the government and they are pushing them just as hard as lenders pushed sub-prime mortgages.
Some lenders sell companion "financial products" claiming the product will pay off better than the equity it replaces (NOT!). Eg, borrow at 6% to make 3%.
"The fees on a reverse mortgage can add up. That 74-year-old borrower living in a $300,000 house [getting a maximum orf $182K] could expect to pay about $15,000 in up-front costs...pluys another $15,000 over the life of the lan in monthly insurance premiums and servicing fees. That's $30,000 in fees, or one-sixth the amount borrowed." (All fees are hidden in the mortgage)
Most reverse mortgages have MONTHLY adjustable interest rates.
Some lenders brazenly say have all this money and let your kids inherit your house. (what house, after all those fees, it's gone)
And here's the real problem...you've got a retired person on a modest income who decides they need more money than they've got. They have a choice. They can sell the house and move into something smaller, rent, or in with their children. They probably won't owe capital gains if the gain (due to the $250K/$500K deal), the get all the money and their expenses drop. With the cash visible in a bank account, they can keep track of it and stick to the 4% rule.
Instead, they stay with the expensive house, they get the reverse mortgage, They obligate themselves to continued insurance, continued property taxes, maintenance, utilities and, oops, the inability to move if the outstanding loan gets higher than the value of the house! Meanwhile the loan gets bigger and bigger at outrageous rates. They still lose the house, but now have nothing to show for it.
One example: Woman borrowed $77,000 in 1993. She died in 2007. The balance due on the loan was $588,000 due to fees, interest, etc. That was in 14 years. If she had been buying the house, a fixed rate 30 year mortgage would have cost her $230,000 over the life of the loan. |
| Answer by :
the tax lady On Date
2009-12-02 17:49:54 |
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