Reverse

Beware of Pitfalls with Reverse Mortgages

Responding to a reader question, Laura Rowley, writing for AOL Daily Finance, warned that reverse mortgages are "complicated, expensive and ripe for abuse."

The question from the reader asks about reverse mortgages because their are so many financial planners pushing this sort of thing.  The response falls along the lines that reverse mortgages work for those seniors with little or no other options.

It is yet another article that relates the fees associated with a reverse mortgage as "hefty," but without any type of comparison to the fees and benefits of other types of borrower.  Pointing to the mortgage insurance premium as the largest fee, but does not relate to the functions of that insurance or a comparison to other government-insured finance programs.

Siting sources from the NCLC, Rowley describe pitfalls of the product related to limited issues that have occurred in the industry, including cross-selling or pushing borrowers into a higher interest rate for the sole purpose of increasing commissions.  She warns that those considering a reverse mortgage should steer clear of anyone who suggests combining reverse mortgage proceeds with any other sort of financial product.

The article does correctly warn that those seeking a reverse mortgage should consider their need and the amount of money received.  A large lump sum is not appropriate for borrowers an the option of a line of credit is better option in those cases.

The final statement of the article comes across with a bit of a sense of sarcasm as Rowley states, "Good luck with your decision."

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