Reverse Mortgage Scams

Reverse mortgages scams are on the rise. Reverse mortgages are becoming more popular with seniors who are looking to supplement their retirement income. With the popularity gaining, more and more people are trying to cash in on the lack of knowledge of seniors and rob them of their money. There are many cases of reverse mortgage scams or frauds. These scams can have a devastating effect on a person's retirement since a house is typically your largest asset. These scams can cost you thousands of dollars in home equity. The biggest way to fight against this rise in reverse mortgage scams is to educate yourself about reverse mortgages.

You don't have to pay for information.

You can get all the information you need about reverse mortgages free from HUD. Some companies are charging thousands of dollars for this information. Typically these companies add on the charge for this information as part of an estate planning program.

Don't use a reverse mortgage to pay for other products.

If a company is trying to sell you a product and suggests that you use a reverse mortgage to finance it - RUN! Many companies selling annuities or other insurance products do this. These companies are getting paid on the reverse mortgage and the insurance products. The reverse mortgage scam is not that it's a bad idea, it's just used in the wrong way. When you add up the fees associated with both products, you are paying way too much.

Beware of high fees.

Some lenders will prey on seniors' lack of knowledge and include high fees and unnecessary terms in the contract. There are some terms included that could cost thousands of dollars in equity with no benefit for the additional cost.

How can you protect yourself from reverse mortgage scams?

1. Take advantage of HUD counseling. Almost all reverse mortgage contracts will require counseling. Beware if you are told you don't need it. HUD counselors will help you determine whether a reverse mortgage is a good option for you.

2. Shop around. Get several offers from different reverse mortgage lenders and compare for your best deal.

3. Make sure you understand your reverse mortgage contract thoroughly. You cannot afford to make a mistake - it could cost you your retirement. Your reverse mortgage counselor is there to help you.

Get information about buying and selling homes, different mortgage types and other real estate information at Real Estate - Get In The Know.

How Does A Reverse Mortgage Work?

When considering options for using the equity in your home, you may have come across the idea of reverse mortgages and you've been asking, how does a reverse mortgage work? A reverse mortgage works the opposite of a traditional mortgage. Instead of making payments to reduce the loan amount and increase the equity in your home, you are receiving money that will use up some of the equity in your home and increase your debt. Increasing your debt may seem like a bad thing to do but for seniors, this is a good way to get additional money to spend and not worry about repayment.

Basically when you get a reverse mortgage you agree to a certain amount of money paid out either as a lump sum, monthly payments, or a line of credit. In return you agree that when the house is no longer your primary residence, you will sell it and pay the money back along with other fees associated with the loan, such as interest.

Reverse mortgages are available for people 62 years and older. There are many factors that go into the amount of money that you can receive, including your age and how long you may live, the value of your home and if you owe anything on it. With a reverse mortgage you retain ownership of the home, and can have money to make needed home repairs, pay down expenses, or enjoy your quality of life.

There are many things you should consider about how reverse mortgages work when deciding on your options. Reverse mortgage contracts are a little more complicated than traditional mortgages. A lot of times people go into these contracts without knowing the true costs, such as what you'll have to pay back on top of the money that you receive. Understand, that to get out of this mortgage you will probably have to sell the house because normally you can't pay the money back without selling the house. For some people are home equity loan might be safer and easier.