The Quiet Comeback of Reverse Mortgages

[jakeXT]

WHEN Peter and Joyce Hill wanted to buy a home in a community for people 55 and older in an area they had always admired in Lancaster County, Pa., they used a reverse mortgage to finance building in that development.

“A reverse mortgage gave us the option to build what we wanted,” said Peter Hill, 79, who retired two years ago from a career in telecom engineering. “That appealed to us.”

Reverse mortgages — which let homeowners 62 and older tap their accumulated home equity without facing monthly payments in return — earned a bad reputation over the years when they were subject to widespread abuses by lenders.

The volume of these mortgages dropped to around 30,000 this year from about 115,000 at their peak popularity in 2009, according to the Federal Housing Administration. But with reforms in the system, they are making a modest comeback, seen as a way of helping some retirees fill gaps in their future income.

http://www.nytimes.com/2016/07/23/your-money/the-quiet-comeback-of-reverse-mortgages.html

[procon]

1. A few years ago, my mother in law wanted to do that. We talked her out of it.

The small print tells you more than the glitzy sales pitches, like interest is added to the balance you owe each month which means the amount you owe keeps growing as the interest accumulates. And most reverse mortgages have variable interest rates and all kinds of little fees, surcharges and costs that get tacked on over the life of the mortgage, always adding to what's already owed.

The homeowner still has to pay property taxes, insurance, utilities, fuel, maintenance, and the lender can require them to buy expensive insurance from their agents, and even dupe the owner into unneeded and costly home improvement or maintenance services which get charged to the mortgage.

So the reverse mortgages she was looking at would have used up most of the equity in her home and left her with no assets to pass on to her grandkids as her heirs.

[Uben]

2. They are a Major rip-off

Don't be duped.