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If you are in your sixties, and own your home, chances are you have heard about reverse mortgages. Reverse mortgages can be helpful to homeowners who want to stay in their homes but are having trouble keeping up with their mortgage payments, or who need additional funds to fix up their house or pay for services. But, there is a new twist on the sales pitches for reverse mortgages – seniors are being urged to take out a reverse mortgage to buy risky investments. This sales practice has recently cropped up in Michigan.
If you are 60 years of age or older, you can arrange for a loan called a reverse mortgage, or home equity conversion loan. These loans can be paid out in monthly installments or in a lump sum. The loan comes due when you vacate your home. Unlike traditional mortgages, whose loan balances get smaller, reverse mortgage debt gets bigger over time.
Self-described estate planners in Michigan are luring older people into “free lunch” seminars at which participants are encouraged to take out reverse mortgages on their homes and to use the proceeds from the reverse mortgages to purchase annuities. A formal complaint about these “free lunch” seminars has been made to Michigan Attorney General Mike Cox.
“My office will go after those who target seniors and threaten a lifetime of hard work and savings,” Cox said. “Michigan’s seniors have paid their dues; they shouldn’t have to worry about losing their life’s savings.”
In early March 2008, the Financial Industry Regulatory Authority (FINRA) issued an investor alert urging homeowners over the age of 60 to carefully weigh their options before tapping into their home equity via a reverse mortgage to obtain additional income for their retirement years. The alert further reminds borrowers that reverse mortgages should generally be a last resort. Seniors do not often realize that these loans are expensive and that the fees and costs associated with them can actually be higher than an ordinary home loan. For example, most reverse mortgages tack on a $35 fee each time a check is mailed.
“If someone urges you to obtain a reverse mortgage to make an investment or purchase insurance, be very skeptical,” Steve Gools, AARP Michigan State Director, said. “Reverse mortgages can be a useful tool for certain older Americans who may otherwise face losing their homes. But, for anyone else, they are an expensive option that may prematurely deplete your home equity. I cannot think of one instance where a person should take out a loan to buy an investment. To add insult to injury, the annuity investments being touted are often unsuitable for older people too. Many of them have lock-out periods where you cannot get at your money without paying a steep penalty, even in an emergency.”
AARP urges those who are eligible to obtain reverse mortgages to carefully consider whether or not they are good candidates. Seek out a qualified financial planner or a second opinion. Make sure you know how much that loan will cost over time, including points, monthly fees, interest and closing costs. Do not ever do business with someone who is pressuring you or giving you a hard sell. Thoroughly check into their licensing and credentials before sitting down to talk.
For more information and resources about reverse mortgages, visit www.aarp.org/money/revmort or call the AARP Michigan office at (517) 267-8913.
Added: April 23, 2008
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Views: 115 | Comments: 0 | Bookmarks: 0
Comments (2)
communityhost says:
Welcome Aboard , AARP Michigan!
We hope you enjoy the new web site! Please come in , bring your friends, join some groups, and make some new friends. We would like you to use the new site freely, and make connections around the nation, or the globe!
We are prepared for you, since we already have a Detroit Pistons group formed!
if you need any help navigating the new web site, we will be happy to assist you.
Welcome again, AARPMI
AARP Community Host
Welcome, again, AARPMI
We hope you enjoy the new web site! Please come in , bring your friends, join some groups, and make some new friends. We would like you to use the new site freely, and make connections around the nation, or the globe!
We are prepared for you, since we already have a Detroit Pistons group formed!
if you need any help navigating the new web site, we will be happy to assist you.
Welcome again, AARPMI
AARP Community Host
Welcome, again, AARPMI
Posted: January 16, 2008 2:21PM EST
Betsy says:
How's Michigan doing? Did you get hit with the tornadoes , too??
Posted: January 9, 2008 4:50PM EST
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