Celebrities in television commercials encourage vulnerable seniors to turn the equity in their homes into cash. Seniors are told to use the money for vacations or other ‘well deserved’ spending. These commercials do not explain the high costs, fees, and risks of foreclosure.
It is estimated that 70% of seniors receive a lump sum payout from the reverse mortgage company for the equity in their home. Most often the money is spent by the time it is truly needed for health care costs and major home repairs. There are severe hardships that can occur when a senior has no money for personal care and is ‘trapped’ in his / her home due to a reverse mortgage obligation.
To protect yourself:
- Understand that a reverse mortgage poses a significant risk to your financial well being
- Plan for future cash needs for health care
- Plan for future cash needs for home repairs, insurance and taxes
- Investigate alternatives such as traditional home mortgages and home equity lines of credit.