A reverse mortgage is a loan that can be taken out by homeowners who are age 62 or older; the loan allows them to change a portion of the equity in their home into cash. A traditional mortgage requires the homeowner to make monthly payments to the lender. Following each payment, the homeowner’s equity rises by the amount of the principal that is part of the payment.
A reverse mortgage, however, does not require the homeowner to make any monthly payments. Instead, the lender submits payments to the homeowner, who can use such payments to pay for their basic living expenses and cover their health care costs, while the homeowner is still residing in the home.
If you decide to take out a reverse mortgage, you do not have to pay back the loan until you sell the home or you are no longer living there. You do, however, need to stay current on your payments of property taxes and homeowner’s insurance; if you own a condominium, then you are also required to remain current on your condo fees.
Although a reverse mortgage may seem like an effective way for seniors with limited income to add to their social security or other income, it can also be a way for lenders to defraud seniors. A reverse mortgage can be costly, and the terms of the mortgage can be complex. There are also mortgage brokers who directly attempt to deceive seniors by making false claims.
Among the fraudulent tactics used by mortgage brokers is to apply a forceful and aggressive sales pitch to try to convince seniors to take out a reverse mortgage loan. The lending practices faced by seniors are similar to those experienced by consumers who were persuaded by brokers to take out subprime mortgage loans.
Seniors may also fall prey to deceptive advertising, which may neglect to reveal the fees, terms, and risks involved in taking out such a loan. Homeowners may also be incorrectly advised that they will be able to keep their home if they take out a reverse mortgage, and that they will never be in any danger of losing their home.
However, there are certain situations in which they could lose their home, including sale of the home or transfer of title; the home is no longer used as the principal residence of the homeowner; death of the homeowner; or inability of the homeowner to fulfill the terms of the mortgage, such as payment of property taxes or hazard insurance, or failure to maintain the condition of the property.
If you are considering taking out a reverse mortgage loan, or if you believe you have been defrauded by a mortgage broker, it is advisable to consult a real estate attorney. A lawyer can make sure that a lender is not trying to take advantage of you. Consulting a lawyer can help you avoid many unfortunate circumstances, such as the foreclosure of your home.
Last Modified: 04-24-2018 08:36 PM PDTLaw Library Disclaimer
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