How to Keep Yourself Safe When Getting a Reverse Mortgage Loan

The reverse mortgage loan is a type of home loan that is available to seniors who currently own a home and have home equity. It has been a source of much controversy in recent years because of the fact that some seniors have been swindled out of their homes as a result of predatory reverse mortgage lending. However, reverse mortgages can be a great way for the elderly to access income and to afford to remain in their homes after retirement. In order to maximize the benefits of the reverse mortgage loan, seniors need to know what to do to keep themselves safe from bad lenders.

What is a Reverse Mortgage?

The reverse mortgage is a home loan which allows you to access income through your home equity. You work with a lender to determine the value of your home. You can then access a percentage of that value and get it in cash. The cash can be received in a number of ways including a lump sum payment, monthly payments and a line of credit. When the borrower opts to sell the home (or passes away and the home is inherited), the money that has been borrowed through these payments come due.

Why Get a Reverse Mortgage Loan?

The main reason that seniors get a reverse mortgage loan is because they want to be able to remain in their homes after retirement but can’t afford to do so on their retirement income alone. The money allows them to pay their property taxes and afford repairs that are needed on the home. They may also use the reverse mortgage money to pay other high interest bills, such as credit cards. In some cases, the senior will use the money to realize lifelong dreams such as world travel. The money is the borrower’s to do with whatever he or she would like to do.

Problems with the Reverse Mortgage Loan

Unfortunately, many seniors have taken out a reverse mortgage loan that turned out to be bad for them. This was usually caused by the fact that they didn’t clearly understand the terms of the loan. In some cases, they and their relatives didn’t have the money to pay back the home mortgage when the house was sold and so the house was lost to the bank. In other cases, the loan turned out not to be a reverse mortgage and ended up requiring payback at an unexpected time. Much of this has occurred as the result of what is termed “predatory lending” in which reverse mortgage lenders are pressuring seniors into taking out loans that aren’t right for them.