Credit Advice

Have a question? Have advice to share? The combined knowledge and experience of everyone in the Credit Karma community can help you. Enter your question or help others below to get started!

Question

Posted in Retirement
Profile Image

Question By
Illwind45

0 Contributions
0 People Helped
What are pitfalls of reverse mortgages
I am looing at getting a reverse mortgage. Any time I google for pitfalls of reverse mortgages all I get are sales pitches. What are the potential downsides if any of reverse mortgages. Thnaks - Joe

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW
All Responses

Result 1-1 of 1Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next
Top Contributor
2023 Contributions
3849 People Helped
Most Helpful Response

There can be many.

Helpful to 2 out of 2 people

The sales pitch is that you can live off the equity in your home for the rest of your life. 

Not always the case.  I haven't had much experience with these personally, but I can speak from the experience that my in-laws had.  Convinced that this was the best way for them to live out there lives, they signed for a reverse mortgage that the Sales Rep said they needed.  (I call them sales reps, because they have no interest in doing what good for you and give real advice,  they are not "Retirement anylists" as they are sometimes promoted) 

They fell for the sales pitch lock, stock and barrel. They were in their early 60's and wanted to retire. They had the original mortgage that was over 20 years old, but they had taken a second and used the house as collarteral on a couple of other loans they had taken for remodeling the house. All these had to be paid off from the proceeds of the reverse mortgage. 

The end result is that they no longer own their home, They have to pay the insurance and taxes each year as well as maintain the property at a "saleable level'.  If they sell it, they will most likely walk away with nothing and the monthy check they receive is less than $200 a month.  Not exactly "Retirement,  living the high life". They struggle every year with the taxes and I'm having to pay for the monthly yard maintance on a huge lot, now that they can't keep it up. 

Now your situation will most likely be different. Specially if you have no mortgage and the property is unemcumbered. Recent changes to the government guidelines for these have made it more difficult to qualify because the government now requires that the Lenders have to be sure that the homeowner will have enough income to be able to pay those taxes and insurance, because of the high default rates.  The real benificiaries of these loans are the banks that get to add these properties to thier portfoloios.  

But take heed and do your due diligence before signing any paperwork.  You will have to do the numbers and see if it may work for you.  My suggestion is that you may be better off in the long run by selling off the property and investing all the profit into annuities or a savings plans that will pay you monthly or annually.   Everyones situation is different. Get advice from a proffesional, not a sales rep. 

Good luck 

Result 1-1 of 1Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW

Reply to this Question

Write your response:
Enter Your Comments

The Credit Advice pages of the Site may contain messages submitted by users over whom Credit Karma has no control. Credit Karma cannot guarantee the accuracy, integrity or quality of any such messages. Some users may post messages that are misleading, untrue or offensive. You must bear all risk associated with your use of the Credit Advice pages and should not rely on messages in making (or refraining from making) any specific financial or other decisions.