Lillian Roberts’ husband David tragically died in a motorcycle accident in August of 2015. She was shaken with fear and sorrow.
7 days after later, a loan servicing company called saying they needed payment for the entirety of their mortgage, or they would foreclose within 30 days.
Evicted by the bank
The Roberts’ had what is called a reverse mortgage taken out in 2011. A reverse mortgage allows homeowners to borrow money against their home equity. These types of loans often have age restrictions. In Lillian’s case, she needed to be at least 63 to qualify so her husband David could be the only one on the plan.
Many loan companies make false promises saying spouses can stay in homes even after the other spouse dies. Lillian was given a false promise like this.
“The love of my life died, and 7 days later I was told our house was being put up for auction. We raised our kids in this house. All the memories and love. I felt like I was being robbed.” – Lillian Roberts, Aberdeen
Lillian’s story is tragic but all too common. Many financial experts consider reverse mortgages to be a loan of last resort. It is too big of a risk to have your partner lose the home if you die.
When Reverse Mortgages Can Be Good
ConsumerProtector recommends more reforms around reverse mortgages. Seniors should not discard the benefits of a reverse mortgage. Sometimes they are a good financial bet.
Consider the story of Paul Harrison of London. Paul had his house paid off. He took out a reverse mortgage to have an ever present line of credit in case of emergency.
“I get so much security for having that extra money available in case I need it” says Paul.
Questions to Ask Before You Get a Reverse Mortgage
We recommend seniors ask these questions before they take out a reverse mortgage.
1. Is there another way to meet your financial needs?
It is almost always better to reduce your expenses before you take out a new loan. Downsizing from a bigger to a smaller home can save families a lot of money.
2. Think about how long you want to stay in your current house.
Reverse mortgage are not cheap. There are a lot of fees, and you will likely need to pay back at least 2% of the loan every year.
3. Is your home right for you as you get older?
Multi story homes with a lot of stairs may not be the best choice for seniors. You will like appreciate a one story rambler as you age. It is also important that seniors live close to health facilities.
4. Can you still live in the house if something happens to your spouse?
It’s not uncommon for senior spouses to die or have to go to a nursing home. This might mean that you would have to take on all of the reverse mortgage expenses. The house could be taken from you if you do not have enough money to cover the expenses.
Asking these questions will help seniors make the best choice. Take every step you can to protect your family from losing their home.