Warning: Avoid This Reverse Mortgage Scam
By admin on Nov 29, 2007 in Money
Reverse mortgages are gaining in popularity. That’s primarily because they can provide a good solid income for aging seniors.
A reverse mortgage allows the homeowner who is 62 years old, or older, to take equity out of his property and convert it into cash.
The premise here is you get paid now rather than your heirs getting paid later.
As long as you live in the house you will not be required to pay back the loan. The loan is also federally insured if it is a HUD Reverse Mortgage.
The loan will be paid back to the lender when you sell the house, or no longer use it as your primary residence. Your heirs will get the remaining equity.
Here’s the biggest danger.
There are unscrupulous "financial planners" who will try to act as middlemen between you and the lender.
You don’t need them.
There have been cases where older seniors have been charged thousands of dollars for information that HUD provides for free.
These companies often call themselves "financial planners" which gives them the appearance of credibility.
But according to HUD you can get counseling and the location of the nearest HUD-approved housing counseling agency near you by calling 1-800-569-4287.
Reverse mortgages can be the answer for some aging seniors, but you must go to the right source for all your information.
Popularity: 2% [?]
Tags: Money
2 Comment(s)
By Andrew Overmyer on Jan 26, 2009 | Reply
First-hand experience is related here.
Two years ago I decided to give the reverse mortgage process a looksee. One of the Local agencies –I think it was HUD gave a seminar at our local senior center. It looked pretty good. I had alot of equity in the house and was not really ready to move from the area but needed some liquid as my wife of 30 years had passed 90 days prior. FF sent a young man out to tell me about the loan. The guy was knowledgeable but had a speach impediment. This combined with my hearing impairment was quite a secne when we started discussing the process. I then went to the required counsouling and obtaind the certificate ($150.00) and started process on the loan. The loan was approved (of course, retail market value 465,000, loan principle would be 93,00 I would get 68,000, process fee 12,000 steep I thought but it would get me into the financial position I wanted. The no payments deal was attractive.what I had been paying on the low principle $625/mo) could go into the saving account. Deal. Done. Fast forward to one year later. Principle is now 163,000 not 93,00 as it was a year previous. Loan to value still good but the interest was eating my principle on a monthly basis like pac man after the cherry. Fast forward a year after this. Government comes out with “stimuls” plan and I decide to refi-downsize and sell the house. Reality check. Principle with Financial Freedom ( The guy that let that become their company name should be tared and dipped in feathers) is now 215,000 and themarket is in the dumper. Loan processing fee would be 18,500 ( right–eighteen thousand five hundred) and I could get 45,00 from the equity to value. I decide to think about this–pretty lousy return. Financial Freedom changes their proposal–I can now only get 25,000 and it still would cost 18,500 for the loan processing. the principle would then be 379,000. this means if I was lucky enough to SELL the property at even near market value after paying r.E. commish I’d go down the road with a very very short bundle of about 15-20,00. Thank you Financial Freedom. We will probably see you on the news soon in a story about Finances that will make Madoff and Barney Frank look like penny pinchers. Trust me. Now for the rest of the story?
Right–now I sit here paying property taxes on a property that I can’t even deduct improvements made on my tax form ( they never told you that?) or the principle interest paid to Financial Freedom ( they didn’t tell you that you can no longer deduct your interest on the property? That is reserved for Financial Freedom–THEY deduct the interest paid–yep check it out.
By admin on Jan 27, 2009 | Reply
Andrew, thank you for this warning that we all need to pay attention to.
Your story touches me deeply because it is very hard to listen to these sales presentations anyway, but especially if you have a hearing problem- it becomes much more complicated.
This is a subject we wll be covering in more detail in the future because a lot of people over 50 are interested in these types of mortgage deals and we certainly need to be careful.
We also have a sister site about real estate you might be interested in… http://www.realestatewindfall.com