As housing costs increase, so does the cost of living for those on fixed incomes. For many elderly homeowners, reverse mortgages are seen as a viable solution.
Reverse mortgages allow homeowners over the age of 62 to borrow against the equity they have in their homes, meaning the bank or lender that issues the reverse mortgage pays the homeowner, decreasing their equity and increasing their debt.
During the course of one woman’s struggle with her reverse mortgage, NBC 7 Responds learned some useful information you should know when seeking out a reverse mortgage:
- Talk to at least three companies before signing on the dotted line.
There are many options and many lenders offer different terms. Make sure you know those options and which ones make the most sense to you.
- Bring someone you trust along with you when discussing the terms of the loan.
While this may be a difficult favor to ask, it’s worth the hassle and can save you money as well as unneeded stress to have a second person reading and hearing what you’re about to sign.
- Know that many of these terms are negotiable.
Don’t feel pressured and ask questions. If you’re not satisfied, ask for changes to be made.
- Look at the fees and the conditions of the loan before you sign.
Make sure you know whether the loan offers a credit line or fixed-monthly payments.
- Trust the person you are dealing with.
If the person that is trying to get you to sign the loan doesn’t seem like they understand what the contract agreements are, or if they can’t help you understand the loan, you shouldn’t be working with them.
While reverse mortgages do offer solutions for those in need of money, there are problems that people need to look out for.
Chula Vista resident Joan McClelland took out a reverse mortgage in 2011. The 95-year-old widow and mother of four took out the reverse mortgage to help pay her monthly bills.
Joan soon began receiving $1,800 per month as part of her agreement. But the checks stopped soon after the initial lender, Wells Fargo, sold the reverse mortgage to another bank, Champion Mortgage.
Joan was owed one more check. She contacted NBC 7 Responds and we helped get her last check and possibly save the home that she and her deceased husband had raised their four children in.
Attorney Gary Quackenbush said he’s seen situations, like Joan’s, end badly and that it pays to do your homework before signing a contract.
“I know it’s a pain to shop,” says San Diego-based attorney Gary Quackenbush. “I know it takes time but ultimately you’re gonna have to live with the decision for a long time, so make it right.”
The Federal Trade Commission also has a guide into terms and rules used for reverse mortgages. To read their guide, click here.