Reverse mortgages (aka Home Equity Loans) are a great way for seniors to supplement their income, but problems do rise, when these seniors are not fully informed about the pros and cons of these loans.
Brokers that use pressure tactics and provide misleading information can be blamed for most of these problems.
Christine Dugas of USA Today shares some of the more common reasons why some seniors end up delinquent on their payments:
Closing costs
“We didn’t know that we had to pay over $11,000 in closing costs,” says 75-year old Nelly Rush as she relates her story with reverse mortgages. These closing costs include appraisal fees, origination fees, up-front mortgage insurance premiums and other expenses.
Tax, insurance and maintenance obligations
Beneficiaries from home equity loans need to regularly pay property tax and homeowner’s insurance premiums while keeping the property well maintained. Failure to do so will cause the loan to be declared due and payable – meaning foreclosure for those that cannot pay up.
Surviving spouse/inheritance payout rules
If the only signor to the loan dies, the surviving spouse or inheritors must pay the full mortgage balance after one year – even if the value of the home is significantly less than the balance.
Housing and Urban Development (HUD) is withdrawing this controversial rule, but there is no guarantee for those that have already signed up for a reverse mortgage in past years.