Reverse mortgages can provide much-needed cash for seniors whose net worth is mostly tied up in the value of their home. A reverse mortgage is a loan for homeowners who are 62 or older and have considerable home equity. It allows these seniors to borrow money against the value of their home and receive funds as a lump sum, fixed monthly payment, or line of credit. the entire loan balance becomes due and payable when the borrower dies, moves away permanently, or sells the home.1
There have been some issues associated with reverse mortgages, however. Aside from the potential for scams targeting the elderly, reverse mortgages have some legitimate risks. Despite recent reforms, there are still situations when a widow or widower could lose the home upon their spouse’s death. There have also been instances in which reverse mortgages have been advertised using false claims.1
For example. a California-based reverse mortgage broker falsely told potential customers that a reverse mortgage would mean no payments. They further claimed borrowers would not be subject to costs associated with refinancing a reverse mortgage.2 The fact is, people who take out a reverse mortgage will need to pay several costs, do incur a range of costs, including fees for closing, appraisals, title insurance, and property, insurance, and maintenance fees.3
Because of this, some states have passed laws that prohibit what lenders can and can’t say...
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