Avoid These Reverse Mortgage Traps

On Behalf of | Oct 14, 2022 | White Collar Crimes

Reverse mortgages seem like the perfect answer to a lot of older homeowners’ problems. But you need to be aware of potential mortgage fraud scams that people will use to take homeowners’ money, leaving them with new debt or possibly without a home. These reverse mortgage scams are often targeted at the elderly, whose mental acuity might be on the decline. Watch out for these reverse mortgage scams.

What is a reverse mortgage?

While a reverse mortgage can be a good option if you choose the right one, there are some scams that you should watch out for. First of all, a reverse mortgage is an option when a homeowner has paid off their house or is close to paying off the total amount but doesn’t have enough money to live every month. The bank will pay the homeowner a monthly amount, thereby slowly purchasing the house back from the homeowner. This can be the right option for some older people because it gives them the money they need to pay bills.

Common reverse mortgage scams

A reverse mortgage scam is a type of mortgage fraud. Unfortunately, unscrupulous contractors can suggest that they take out a reverse mortgage to pay for repairs and upgrades that the homeowner doesn’t need. Some other people who could take advantage of homeowners include relatives with power of attorney rights and realtors who convince homeowners to buy less expensive houses that were flipped inexpensively. The realtors take the proceeds, and the homeowners are left with a shoddy house.

How to avoid a reverse mortgage scam

There are several red flags that you should watch for, including high-pressure sales tactics, business terms that don’t make sense, unwillingness to explain terms and clauses that you don’t understand and reverse mortgage deals coming from unsolicited phone calls, advertisements, or emails.

If you’re unsure of whether or not any kind of financial deal is legitimate, always slow down to think about it and talk to someone you can trust.