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Pitfalls Of Reverse Mortgages May Pass To Borrower's Heirs

Thursday, March 27, 2014 - 9:04 PM
From The New York Times via Yahoo Finance:

... along with a growing number of baby boomers, is confronting a bitter inheritance: The same loans that were supposed to help their elderly parents stay in their houses are now pushing their children out.

... Similar scenes are being played out throughout an aging America, where the children of elderly borrowers are learning that their parents’ reverse mortgages are now threatening their own inheritances. Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes that need not be paid back until they move out or die, have long posed pitfalls for older borrowers.

Now many ... are discovering that reverse mortgages can also come up with a harsh sting for their heirs.

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9
pearlbrownpearlbrown1,465 posts since
Nov 2, 2010
Rep Points: 6,374
1. Thursday, March 27, 2014 - 9:24 PM
Thank you for sharing this Pearl.  These so called Reverse Mortgages really irritate me because if one pays attention to the tv advertising they bring out the point that "you can keep your home" .  They never state what happens to the home at the death of the owners.  The home they hoped to leave to their children may never end up getting into their hands.  I am surprised that we don't hear more about the truth behind Reverse Mortgages and the need for seniors to really understand what they are doing if they are interested in them.
4
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,128
2. Friday, March 28, 2014 - 8:36 AM
When I was cleaning out my father’s file cabinet I saw that he had a folder on a reverse mortgage and in fact looked into it when he was in his late 70’s. So glad he did not follow through. There really should be some regulations on these types of ads that are directed at seniors so they are fully aware of all consequences. Many elderly are just not going to think to ask the questions they need to ask and get a full understanding of what they are signing.
3
FARFAR108 posts since
Feb 26, 2013
Rep Points: 386
3. Saturday, March 29, 2014 - 8:49 AM
With the fees, the closing costs etc I believe that a reverse mtg is as bad as payday lenders. 
A person who cannot afford to stay in their home would be so much better off selling the home and getting a nice apartment or better yet an apartment in a senior center. I believe it is another product for banks to make a lot of money from people that can least afford it. There are so many complexes in my town and I visit so many of my friends there and they love it. Something is always going on. A reverse loan is a mtg. Why not get an equity line or equity loan. They are free in so many places. This is just another ridiculous scam that banks have and in my estimation use it on our most vulnerable seniors. 
3
Ally6770Ally6770930 posts since
Jan 16, 2010
Rep Points: 2,706
4. Sunday, March 30, 2014 - 8:22 AM
Reverse mortgages are the devil's own design.  The only solace is that the number of new reverse loans have declined significantly.  Besides the perils described in the article, they're unbelievably expensive. 

My greatest fear is that the boomers coming of old age, not having the retirement funds needed to sustain their life style, will increasingly turn to this avenue for funds.  Sad, very sad. 

This, of course, is not new.  The disadvantaged are often taken advantage of.  Think payday loans, cash loans..............and their excessively high interest rates.
2
gbtexasgbtexas3 posts since
Aug 18, 2013
Rep Points: 22
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