As long as you are living in it, the house is your collateral. No credit check is required. You do not have to repay the loan unless you move or die. If the property devalues, you can never owe more than it is worth. Any equity in the home can be used, tax free, in any way you wish or need. Any equity that you spend is simply added on to the loan, which is paid back by your heirs if they wish to keep the house, or otherwise it reverts to the mortgage company.
This debt will include high interest rates, usually from eight to ten per cent of the value of your home. They may also tack on closing fees and various other fees. You are decreasing the amount your heirs will receive, since the full payment will come out of the sale of the home before they see any money at all.
In addition, you must be certain that Social Security will not be halted because of too large a loan received from the reverse mortgage. But that really isn’t the worst of it. Because of the unstable economy, reverse mortgaging has become a high pressure sales business (kind of like time sharing ). What may appear to be a legitimate offer can be a scam that will only waste what little security you may have, and take your home from you on top of it.
These agents and brokers will get you to sign away the rights to your home and leave you with nothing.
You need to steer clear of anyone offering you a deal that transfers ownership of your home to would be unknown investors. Some scam artists are saying that loans are HUD sanctioned when they are not.
Do not do business with anyone who tells you that you need to invest the proceeds from your reverse mortgage. At best, you will end up paying even more fees for investments that are not necessarily safe. At worst, they won’t invest it at all…they will steal it.
Reverse mortgages are not all bad. But it is much safer to try to make it on your income by tightening your belt, down-sizing your home if you can, and following my tips on how to lower your bills, stay warm, and eat well, on a very tight budget.
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