It is not surprising to see, but a bit disheartening. The airwaves are full of commercials that try to attach themselves to your wallet. These are hard times for many, and the prospect of putting a little money in your pocket might sound enticing. Beware. There is no free lunch. These people are out for your money. They are not your friends.
Reverse mortgages are big these days. Out-of-work actors are cashing in with some very appealing pitches to get you to start thinking that reverse mortgages are the answer. They are not. The thing you spent all your life paying for may be the biggest asset you have. It is also the easiest one to lose.
There are many questions that should be answered, and may only be answered by someone who is obligated to your best interests and not the interests of the lender. There is a big lesson to be learned right off the bat. The person who wants to help you is a lender. They don’t lend money for free. They charge interest, and how that interest accrues impacts the amount you end up owing.
Loans and mortgages have fees associated with them. One of the oldest tricks in the lending industry is to roll the fees in to the loan. A lower interest rate can lower your payments, but the amount you owe can increase.
Annual service fees are still used by some lenders. They may be called any number of things, but their only object is to charge the lenders more money. Service fees can be built into the loan and accrue over years.
One of the topics mentioned in television ads are that reverse mortgages are ‘government approved.’ There was a time when consumers were protected from lenders who offered loans at what was termed unconscionable rates. This is no longer true. Conservatives have been steadily whittling away at the Consumer Finance Protection Bureau. Bookmark that page and keep an eye on them. They were originally created to protect you from banks who engaged in predatory lending practices.
Reverse mortgages are not illegal. They can be a last resort for folks who need money, but remember, these people are not your friends. They are trying to lend you money. Make sure you know what the real cost of the money will be.