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10 Reasons Not to Get a Reverse Mortgage
Last week Fox Business posted an article entitled “10 Reasons Not to Take Out a Reverse Mortgage” . Everyone loves a top ten list and one would think such a list from a well known business site would be rooted in truth. Unfortunately Fox’s post is neither fair or balanced and ironically the article is reposted from the money management site The Motley Fool. Two paragraphs into the article one can easily sense what is coming from columnist Peter Bennett stating ‘It’s a loan that seems almost to good to be true. That’s why it’s usually pitched on that fantasy-making machine, otherwise known as TV”. He then enumerates several of what he calls ‘aging TV stars. Let’s score Mr. Bennett’s ten points and see how he does.
1- High fees. The claim is that a typical 30 year mortgage only costs $3,000 versus up to $15,000 with a reverse. What he fails to mention is a typical mortgage amortization for a $165,000 30 year loan at 3.5 percent would have the borrower paying over $340,000 if they kept the mortgage to the bitter end. Upfront fees are one thing, ongoing costs are quite another. A typical mortgage still leaves the borrower exposed to possible foreclosure with monthly payments totaling nearly twice the original loan amount. A reverse requires no payments. Let’s give him half credit here.
2- Property taxes and homeowner’s insurance to pay. Yes… you must pay both in a reverse mortgage but he conveniently fails to mention you have the same obligation with a typical mortgage. A senior could avoid such obligations by renting but who wants that? Zero points.
Download a transcript of this episode here.
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