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Home › Articles › Money Management › Mortgage Scams

Mortgage Scams

5 Tips to Avoid Getting Slammed by a Reverse Mortgage Scam

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  • Reverse mortgages typically have closing costs (fees) higher than those associated with a traditional second mortgage or home equity line of credit.
  • Homeowners must pay off any existing mortgages with the proceeds from the reverse mortgage.
  • The loan comes due when the homeowner sells the house, moves or passes away. Thus, the home will not be left free and clear for heirs. Heirs must repay the loan if they wish to keep the home.

    • "If you believe a reverse mortgage could be for you, the next step is gaining a realistic view of how this loan could benefit you," Stroh says. For specific details, Stroh advises homeowners take these 5 steps before speaking with a lender:

    1. Learn about reverse mortgages. Many sources, both online and offline, provide helpful information on reverse mortgages, outlining factors borrowers should consider before taking a reverse mortgage loan. Two good resources include the AARP and the U.S. Department of Housing and Urban Development (HUD).
    2. Understand equity. Equity in a property is the difference between a property's market value and the amount of claims held against it (such as mortgage loans or liens). If a home is paid off, the homeowner's equity is the current market value of the home. If the home still is mortgaged, the homeowner's equity equals the home's value minus the balance of the mortgage.

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