The sad fact is, these days nobody is immune to financial troubles. This includes people who have worked hard their entire lives, all the while looking forward to reaping the rewards of their hard work in a restful, stress-free retirement. So what happens to seniors when they run into serious financial trouble? The reality is that wherever there are people in trouble, unsavory parties are out there looking to cash in.Â With nowhere else to turn to,Â many cash-strapped seniors have become the focus for companies looking to hook clients into signing what are called "reverse mortgages." It's true that these arrangements can help some people, and some legitimate lenders do help seniors come to mutually beneficial arrangements.Â But because this is regrettably not true across the board, it's important to understand what a reverse mortgage is and the possible risks, before signing up.
A reverse mortgage allows a borrower to receive a loan secured by equity they own in their home. The loan doesn't have to be repaid until the borrower moves from the home or dies. In order to qualify for a reverse mortgage, a borrower must generally be at least 62 years old. Essentially, these folks are encouraged to cash in the equity they've built up in their homes through long years of payments. A reverse mortgage allows a senior to borrow up to some set amount equal to a percentage of the home's value that is owned free and clear by the borrower. She thenÂ receives regular portions of that amount, without having to make any payments on the loan for the time being.
This sounds like a great deal for some folks, and in fact it may well be for a few. However, nobody should rush into signing a reverse mortgage without considering all other options carefully. It's true that no payments will be made on the loan for the time being, but the loan will have to be repaid eventually. Once the borrower dies, his heirs may be due for a nasty surprise when the lender on a reverse mortgage shows up to collect on the loan. In addition, it's easy for borrowers to be taken in by unscrupulous lenders who do not adequately explain costs, fees and other liabilities associated with the mortgage. Also, the funds received from a reverse mortgage can affect benefits a senior is normally entitled to, such as Social Security or Medicaid.
Be sure to work with legitimate lenders. Make sure you avoid predatory lenders who target older folks and their home equity; some of these unscrupulous companies even try to trick seniors with tactics like modeling mailings to look like official government agency correspondence. Make sure you are very clear on all fees and terms before signing anything. For more information on this topic, consult the American Association of Retired People. They have excellent information about these "seductive" loan offers on their website: http://www.aarp.org/money/personal/reverse_mortgages/.
If you are struggling because of medical bills or credit card debt, it may make more sense for you to declare bankruptcy. Before you put your house on the line, it's imperative to consult with a bankruptcy attorney in order to explore whether this option will offer you a better solution. Remember that declaring bankruptcy will often allow you to keep your home, and you may end up much better off having done so. A reverse mortgage could force you to give up some of the protections afforded by the bankruptcy code should you be forced to declare down the line.
Serving North Carolina residents, John T. Orcutt has helped thousands of seniors get real relief from debt. Call today to set up your free initial consultation. 1-888-234-4181.
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