Here’s your chance to help the elderly rid themselves of unwanted equity, and make money doing it!
I’m sure I’ll either get comments and/or emails about how great reverse mortgages are, but reverse mortgages have their drawbacks:
A reverse mortgage borrower may encounter many financial hazards in taking out a reverse mortgage. First, reverse mortgages are very expensive while promising an uncertain amount of benefits. For example, a typical reverse mortgage may provide to the consumer a $300 per month payment with a monthly compounded interest rate of 1%. Over the course of ten years, the borrower will receive $36,000, but by that time she will owe almost $70,000-almost twice as much as she has received.
In addition, reverse mortgages have complex contract terms that are confusing and can greatly impact the overall cost of a reverse mortgage to the borrower.
For example, a lawsuit filed by the San Mateo County Public Guardian which, on behalf of Berta Grey, an 83-year old woman, alleged that Transamerica Corporation unfairly and unconscionably charged her what was in effect a shared appreciation fee. This fee gave Transamerica an automatic 50% interest in the difference between the base value of the home when the loan was signed and the appreciated value of the home when the loan terminated, even though the fee bore no relation to the amount she actually borrowed. Additionally, the cost of Berta Grey’s reverse mortgage soared when she was required to purchase an annuity in conjunction with her reverse mortgage. An annuity is an insurance product financed out of the home’s equity to provide monthly payments to the borrower immediately or after a certain number of years. The San Mateo County Public Guardian alleged that Transamerica charged Berta Gray the cost of the annuity immediately and that interest began compounding on that fee even though she was not due to receive any payment on the annuity until six years after the loan began, at age 89. Under this arrangement, if Ms. Gray died before the six-year period ended, her estate would see no benefit from the annuity purchase, although she had paid in full for it.
Numerous other front-end and back-end fees can quickly drive up the cost of a reverse mortgage.
Another concern is that borrowers don’t always understand or may not be aware of a loan’s terms or fees. Like how much they are paying in commission, for example.
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fitting move for the brokers and realtors to make. They did not show any scruples in their prior jobs why should they start now….
There are good and bad mortgages of all types out there, and that includes reverse mortgages. As always, one must compare and be very careful before choosing. A good reverse mortgage can free up a great deal of money which can raise the standard of living for many seniors, and in many cases it will allow them to actually get buy where they wouldn’t have otherwise been able to. I know of quite a few seniors who would not have even been able to retire without one.
The sad this is that these kinds of people always prey on the elderly, so this area is fertile soil. The elderly already have their homes paid for in many cases. So you have folks looking to prey on the likes of Mrs. Gray…Sweet old widow ladies whose husbands probably handled the bulk of the finances.
CAn’t wait to hear what Igor says.
Sure,its easy to sit at your keyboard and say that no one forced this elderly people to do anything.But the sad fact is that many are so lonely for any human contact they simply sign on the dotted line for the slick salesperson.
A law should be passed to more closely regulate this practice.In thoery,it could be a good idea, but the possibility of scams abound.
Think about all those that got scammed and didnt compalin and or didnt get their
money back.
A special place in hell for the scum that prey on kids and elderly must exist.
I have a dear old friend who reverse mortgaged her house. The idea was that she’d have some money to put into fixing the place up.
Well, she started on that project, which included dealing with a variety of shady tradesmen, and, long story short, the work still isn’t done.
She also went on a truly baffling spending spree. We’re talking about things like signing up for a coffee of the month club, which included a pricey grinder. But she doesn’t drink coffee. Hasn’t for many years. She also started subscribing to all manner of publications, and buying all sorts of other stuff that she hasn’t used. To the rest of us, this spending spree was a clear sign that she was no longer of sound mind.
I’m sorry to report that some of that unused stuff is just sitting around the place. She can no longer live there because she broke her leg in three places and must use a walker. The house isn’t walker-friendly.
So, in short, this is a reverse mortgage story that isn’t ending well. And I can’t help thinking that she wasn’t of sound mind when she signed up for the plan.
Igor’s word: stupid
Sad. There is a place for these reverse mortgages. Unfortunatley, the quickest and easiest place to close these are with elderly who do not fully understand (and are sometimes trusting to a fault). My theory is that NOBODY qualifies for a refi or purchase these days so some mortgage brokers out there will figure out that these older folks with paid off homes will be the only thing they can close and will prey upon them.
Warning to old people….do NOT trust this man….notice in the background is our earth revolving…he is speaking from beyond this planet…could be satan…or from a bad planet even.
And at no extra cost, once you’ve extracted all the equity from your home, we’ll personally come and remove you!
“It is immoral to allow suckers to keep their money.”
I think that’s a WC Fields approximate quote.. I post it here not to be nasty, cruel, brutish or short… but to remind everyone that this is the Lassez faire version of capitalism/ Libertarianism… that has run its course.
Time for a new philosophy.
Yossarian,
We have spent the last 50 years driving personal integrity and responsibility out of our society.
Capitalism has not failed us. We have failed to ensure the societal standards that permit the moral exercise of capitalism.
All the rules, regulations, and socialist do-gooderism cannot make up for the lack of personal responsibility and integrity.
Beyond that, conducting business is a fundamentally moral exercise, and believing that is important. If, by engaging in ANY business, you already believe you’re a sleaze, then what’s one more trespass?
If, on the other hand, you believe you are serving your fellow man in an upright, moral manner when you conduct a business, then immoral activity (such as this) is an affront to your personal code of conduct.
I second dfenstrate. We have become a nation whose majority are pathetic spoiled children that refuse to take responsibility for anything and will lie at the drop of a hat. I just saw fox news tell the world the problem one of our presidential candidates made was they didn’t lie early or well enough. GOOD GRIEF!!!