What is a reverse mortgage? It is a financial arrangement in which homeowners (usually older people) give up their home's equity in exchange for regular payouts. Older residents in Minnesota may choose a reverse mortgage in order to supplement their retirement income.
If you're considering a reverse mortgage, it's essential to be aware of some common reverse mortgage scams. Let's look at three of these and ways that you can keep from becoming a victim of one of them -- or having a loved one become a victim.
House-flipping scams: This scheme involves taking out a reverse mortgage and then purchasing a low-priced house without making a down payment. Unfortunately, most of these properties look good on the surface but are actually in very poor condition underneath.
Financial planning and investment fraud: In this swindle, investment or financial planners convince older people to invest in some type of financial product. They may suggest that taking out a reverse mortgage is a great way to pay for this often-unnecessary product. In truth, the financial products advertised are not always good investments, particularly for seniors.
Outright theft: This can occur when a company talks someone into a reverse mortgage and promises to use part of the victim's funds to pay regular mortgage payments. Instead of making the payments as promised, these companies or individuals simply keep the money. As you may imagine, this usually leads to foreclosure for the unwitting victim.
You can avoid falling prey to reverse mortgage swindle if you seek advice from a real estate attorney about any mortgage you are considering. An attorney can help you spot scams and can also point you toward proven financial advisors with a solid background of helping seniors plan for the future.