Beware of Reverse Mortgage Specialists Who Might Take Advantage of You

A reverse mortgage specialist will help you determine whether a reverse mortgage is best for you, which type of loan is best and will help you obtain a loan. Also when you obtain a government-backed reverse mortgage there is a requirement to talk with a HUD counselor to make sure you understand why you are doing the mortgage. A person cannot rely entirely on the counselor to determine whether the mortgage is best or not. A major responsibility for dispensing advice lies with the reverse mortgage specialist.

 

Many specialists are not allowed to sell investments or insurance products using the mortgage proceeds.  However, this does not dissuade many specialists from teaming up with a financial salesperson and to have an arrangement to refer clients to this person.  Some insurance agents have been known to own a reverse mortgage company and they require their loan originators to send clients to insurance agents in order to put the money into insurance products such as annuities.

There definitely are situations where using proceeds from the mortgage solely for the purpose of investing or buying insurance could be a good idea. But in some cases it may only be a good idea for the financial salesperson to create a commission and it may end up being an expensive proposition for the homeowner.  Again, in some cases it is not a good idea to do a reverse mortgage solely for the purpose of reinvesting the money in something else. On the other hand, it may be a wise choice.  Any insurance or investment products that are purchased with reverse mortgage funds need to be part of a sound plan for estate planning.

Reverse mortgages were designed to help people pay costs or provide extra income to allow older Americans to remain in their homes. Or sometimes older people want extra cash to buy things they currently can't afford.  Such things as remodeling, finding money for a down payment for a second property, buying a new RV, financing travel, buying a new car, buying long term care insurance and so on.

When doing a reverse mortgage make sure all costs are disclosed and the alternatives are discussed as well. When choosing a reverse mortgage specialist ask for a signed statement from that person that he or she has no relationship with insurance annuity or investment companies either directly or through an associate and that he or she will make no recommendations for selling an investment vehicle.

If you want to use the money and put it in an investment, that should be your choice alone, and someone wanting to make a commission off of you should not induce you to do the mortgage for that purpose.