Is a Reverse Mortgage a Scam?

For some people, a reverse mortgage sounds too good to be true.  But is a reverse mortgage loan a scam?

Borrowers don’t have to fear, but this FHA-backed loan is not a scam to target senior citizens but a resource to help seniors and retirees find financial freedom and the ability to age in place.

Here are some important facts that you need to know about reverse mortgages:

1. Borrowers are required to go to a HUD-mandated reverse mortgage counseling session. This will allow borrowers the opportunity to speak with an impartial, third-party regarding their financial options and reverse mortgages. Do note that lenders/reverse mortgage specialists are not allowed to direct you to a specific reverse mortgage counselor to ensure that you are truly receiving an impartial counseling session.

2. Borrowers are not required to make payments to the lender while they are living in the home, but there are “maturity events” that can cause the loan to go into repayment status. This includes:

• Borrowers must continue to live in the property as their primary residence.
• Borrowers must continue to keep up with the maintenance of their home.
• As with a traditional mortgage, borrowers are still required to pay for taxes, insurance, HOA fees or any other applicable fees.

3. There is a Right of Rescission on your reverse mortgage. This means that before your reverse mortgage is finalized, you have three days to cancel the reverse mortgage. During this time, you would not be penalized if you made the decision to no longer go with the reverse mortgage.

4. Your home still belongs to you and not to the lender. Some potential borrowers are wary of reverse mortgages because they believe it means that they are giving up the title of their home to the bank. However, that is not the case – and homeowners should be happy to know that their home is theirs to keep.

Check out our video on how you can protect yourself from a reverse mortgage scam:

If you want to learn more about how a reverse mortgage can work for you, you can speak with a Senior Advisor at 1-888-808-8486 today.