mortgages can be an important financial tool for senior citizens. But while there are plenty of reputable reverse lenders out there, seniors also need to be on the lookout for scammers, according to a report from Credit.com.
Reverse mortgage scammers use a number of different tactics, according to Credit.com. Some will try to convince seniors to take out a lump-sum payment on their home equity
in order to pay for wholly fictional costs – unneeded repairs, “high-profit” insurance policies, finder fee annuities from fraudulent companies and more.
“After the lump sum is paid out, the fraudster disappears with the money and the senior is left with no cash or equity in the home,” a bulletin from the Department of Housing and Urban Development warned. “They may face eviction if taxes on an over-valued property are not paid.”
Here are some of Credit.com’s strategies for seniors to protect themselves from reverse mortgage
- Don’t wait until you’re in dire financial straits to get a reverse mortgage. “It’s never a good idea to make a financial decision under stress,” said the National Council on Aging. “Waiting until a small issue becomes a big problem reduces your options.”
- Shop around. A scammer will usually insist that you shouldn’t speak with any other lenders, according to Credit.com. But it’s a good idea to check out at least two or three companies’ offers. It’s also a good idea to see what the Better Business Bureau has to say about the companies you look at.
- Don’t purchase other investments from your lender. Your lender shouldn’t be pushing other investments on you, according to Credit.com. The potential for conflict of interest is too great.
- Be careful if lenders tell you to get repairs. HUD only requires that a home be safe and functional, according to Credit.com. Broken furnaces or other things that affect the safety and livability of a home need to be fixed, but many other things don’t. If a lender tells you to get repairs, Credit.com recommends getting a second opinion from another lender before proceeding.
- Don’t give in to high-pressure sales tactics. If a lender is pressuring you to sign, walk away, said Credit.com.
- Attend the closing. That way you can make sure any proceeds from a reverse mortgage are going to you – not to someone else.