The suspicion should be nothing new, but Consumers Union and the LA Times recently released warnings about reverse mortgages, and it’s worthwhile to repeat them here.

The suspicion should be nothing new, but Consumers Union and the LA Times recently released warnings about reverse mortgages, and it’s worthwhile to repeat them here.

The biggest problem with reverse mortgages is that they can be made to appear too attractive to retired senior citizens, when in fact they can be quite risky. Seniors should be wary of reverse mortgages, rather than be misled by them.

      Reverse mortgages allow seniors to tap into their home equity for cash or a line of credit, often with the claim that the money needn’t be paid back until the borrower dies. Of course, this means putting your last great asset at risk. According to Norma Garcia, senior staff attorney for Consumers Union, “Reverse mortgages should only be a last resort for seniors who want to stay in their homes and have no other alternatives to supplement their income.”

      Unfortunately, the reverse mortgage is still too easy to sell. Some of the most egregious sales tactics include various unadvertised fees – including charges, fees, closing costs, and compounding interest on the loan principal – and the often underhanded way that seniors tricked into buying other programs, such as long-term care insurance or annuities, in order to secure the reverse mortgage. Seniors then can actually end up losing their homes should they default on some of those hidden fees or additional programs.

            Reverse mortgages can be viable financial planning tools, but be cautious. There could be hidden traps for the unwary. More information and tips on reverse mortgages can be found at ConsumerUnion.org, along with their original report.