A recent AARP Bulletin questions the helpfulness of reverse mortgages, calling them a complex product that has brought heartbreak to some homeowners.
While the loans are often touted in celebrity-endorsed commercials as “an easy means to a carefree lifestyle,” says AARP, some homeowners take out reverse mortgages too soon, depleting home equity early on in retirement and leaving them unable to pay annual property taxes and insurance.
“Many seniors are suffering financially because the economy tanked. They have no chance of finding a job, they haven’t saved enough for retirement and they’re living longer,” says Gladys Gerson, a supervising attorney at Coast to Coast Legal Aid of South Florida, in the Bulletin. “They’re hit with unplanned expenses or their medical bills skyrocket, so they take out a reverse mortgage and live on the proceeds. That’s where they get into trouble.”
Others are at risk of losing their homes due to “aggressive mortgage brokers” failing to disclose loan terms, according to AARP, citing the reverse mortgage product’s nearly 10% default rate.
For many retirees, though, a reverse mortgage can be “nothing short of a lifeline,” says AARP. That was the case for a Fort Lauderdale resident who couldn’t afford his refinanced mortgage, but was able to remain in his home of 45 years with the help of a reverse mortgage.
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