HOUSTON - Housing counselors say more senior citizens are looking into taking out reverse mortgages on their homes to make it through this economic crisis.
While a reverse mortgage can provide seniors needed cash, consumer advocates warn seniors can end up deep in debt, or even lose their homes.
A reverse mortgage is a type of home equity loan for people 62 and up.
"Before I knew it they were sending me a letter saying they were about to foreclose on the property," said Edith Reedy about her father's reverse mortgage.
Right after her father's death, Reedy says her family had to find a way to buy her father's home back from his reverse mortgage to keep it in the family.
As 401k's have plummeted along with the stock market in recent weeks, local housing counselors say seniors are calling them, inquiring about reverse mortgages. Housing counselors tell us more seniors are inquiring about reverse mortgages.
Said Sherrie Young, Executive Director and housing counselor with Credit Coalition, "They're at the age where they're drawing down interest from their investments and they're worried that this money is going to stop."
While reverse mortgages can offer seniors a lifeline, consumer advocates point out they come with origination fees, closing costs, mortgage insurance premiums, and interest. Plus the borrower must keep homeowners insurance and property taxes paid up, while the home equity decreases, sometimes to zero.
"By the time you pass on or want to sell your property in the future, you may not have the proceeds to move on with, or to leave for your heirs or your estate," said Young.
"I lost my father and then my mother in 2018, so it was just like bam, bam, bam, and in the midst of it all, trying to deal with this, too," said Reedy. "it was very stressful."
Lenders offer a variety of different types of reverse mortgages. Homeowners should explore the options and know the costs of the loan.
Borrowers are required to get reverse mortgage counseling from an agency approved by the U.S. Department of Housing and Urban Development. You'll find a list of approved counselors here.