Reverse mortgages not risk free
Reverse mortgages not risk free

US regulators are warning that people should be careful as many ads don't inform regarding whole story about reverse mortgages.

According to the Consumer Financial Protection Bureau, a study conducted by it on older homeowners found that they were given the false information by the ads; the ads say that reverse mortgages are a government benefit and tell that consumers can stay in their homes for their entire life.

According to the agency, people should have knowledge of the risks of reverse mortgages that are loans for homeowners 62 or older, which have to be repaid with interest and can diminish seniors' funds.

A reverse mortgage lets borrowers to obtain cash or a line of credit tapping the gathered equity in their homes. The loan balance increases and comes due, after the borrower moves or sells the home, dies or defaults on other obligations like taxes or insurances.

The Federal Housing Administration does insurance of most of the mortgages. However, it is wrong that they are a risk-free government benefit. According to the agency, majority of the 97 different TV, radio, print and online ads that were reviewed by the bureau did not mention the risks related to reverse mortgages.

According to CFPB Director Richard Cordray, "Indeed, many reverse-mortgage ads did not even mention anything about interest rates, repayment terms or other crucial requirements of the loan".

If one is interested in a reverse mortgage, then loans that allow drawing money only as required, so as to avoid paying unnecessary interest are suggested.

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