Reverse Mortgage Brokers Come Under Scrutiny

Officially, at reverse-loans.net, we do not have a stance on reverse mortgages but rather choose to inform our readers of the good and bad of the financial tool so that you can make your own decision. It seems that the reverse mortgage is much like American’s stance on global warming, either you love it or hate it, with little room for gray.

Many saavy/shady brokers have given guided their clients into the also buy with their loans. This upsell alone has caused a lot of the negative sentiment with the tool in this country. Getting a reverse loan, why not add an annuity? Why not add a living trust? Why not add disability insurance? There are one of the many pitches equity rich borrowers are exposed to during their first exposure to the reverse mortgage.

A 2006 AARP survey found that one in 10 reverse-mortgage borrowers had been pitched a financial product along with their loan, most often deferred annuities but also long-term-care policies. Buying an annuity with reverse-mortgage proceeds rarely makes sense though. As the example (right) shows, you’re unlikely to earn more with an annuity than you are being charged in interest and fees on the reverse mortgage. Worse, you might have to pay surrender charges that are upwards of 20% to take money out in the first few years. Chart courtsey CNN Money.

Written by charles dennis on May 22nd, 2008 with comments disabled.
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