Consumer Reports has taken a hard look at reverse mortgages, which allow seniors to pull money out of their homes for everything from medical bills to new cars.
The magazine’s verdict: Reverse mortgages can be an important tool for seniors who have equity in their homes but need extra cash for living expenses or to pay off an existing mortgage.
But they can be catastrophic for people who don’t understand the rules or realize just how fast and how high the costs can mount. Before getting involved in a reverse mortgage check out what your TOTAL costs are. You might be surprised.
As the magazine reports, people who take out reverse mortgages “can end up stranded in their homes without any remaining equity to cover unexpected costs later in life.”
And the borrowers aren’t the only ones who can find themselves on the hook.
When loans turn sour, a federal insurance fund can help cover the lender’s losses. Normally, the magazine says, insurance premiums paid by borrowers keep the fund afloat.
But, now, taxpayers are being called upon to step in. In 2009, the magazine reported, the government said $798 million would be needed in the coming fiscal year to cover potential losses.
To read Consumer Reports’ investigation, click here.
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