As a professional in the mortgage industry, I get asked about reverse mortgages all the time. What exactly are they and are they a good idea? Prime Mortgage Lending, Inc. wants to be in a position to help our customers review their options and determine the best financial solution for their immediate needs and into the future. So let’s start out with the basics.
What is a Reverse Mortgage
Reverse mortgages have a complicated history and even more complicated reputation. A reverse mortgage offers people over the age of 62 an option to convert part of the equity in their home cash. This can be used to pay off the mortgage and cover other expenses.
Reverse mortgages, as their name implies, is the opposite of a traditional mortgage. Rather than making payments, you will receive payments monthly. It’s a tax-free payment on home equity, which won’t need to be paid back by your estate as long as you remain in your home.
There are three common types of reverse mortgages:
- Single purpose reverse mortgages. This least expensive option is not available everywhere. They are offered by some state and local government organizations and non-profits, so your location will impact their availability. The money can only be used for one purpose, which is determined by the lender.
- Proprietary reverse mortgages. These loans are made by private companies that both develop and back them. These are based on the value of your home, which may mean more money for a higher valued home.
- Home equity conversation mortgages. These loans are made by the government and backed by HUD. Though they are more expensive than other options, they can be used for any purpose.
How to Spot a Scam
Due to the nature of reverse mortgages, there are a few predatory companies out there as well. While you’re making the decision, use caution. You may feel pressure from the sales representatives. They may make it sound like a reverse mortgage will be the end to any and all financial problems.
They may even try to sell you additional items or encourage you to make investments by telling you the reverse mortgage itself will pay for them. Prime Mortgage Lending, Inc., will never engage in any shady behavior and we will work with you to ensure your finances are safe.
How to Avoid Being Bullied
When you’re in the market for a reverse mortgage, you may also find that some of the sales people can act aggressively. They may indicate that their deal won’t last unless you say yes immediately. However, a reverse mortgage is a financial arrangement that should take thought and commitment, so if you feel bulled by a representative, it may be best to walk away.
If you do feel bullied into making a decision, or if a sales representative is pressuring you to commit to a service you don’t need, it’s okay take a step back and reconsider your options. If it doesn’t feel right to you, say no. Start over with a company that is better suited to your needs.
How to Report Fraud
If you suspect that a sales pitch is a scam or it may be breaking the law, you can report it. Start by letting a lender, such as Prime Mortgage Lending, Inc., know what’s happening. Next, you can file a report with the Federal Trade Commission, your state’s attorney general, or the banking regulatory agency.
We want to make reverse mortgages a safe bet and accessible to residents of the Asheville area. Prime Mortgage Lending, Inc. is happy to take on the role of your advisor and help you determine the best options for your situation. Call us today.