The South Dakota Attorney General's Office is reminding seniors to be cautious if considering reverse mortgage offers.
A reverse mortgage is a loan for homeowners 62 years or older that uses a portion of the home's equity as collateral. Through the terms of the agreement, eligible homeowners are usually promised an upfront cash payout with no obligation to repay the loan, and once they pass away or permanently leave their home the property then belongs to the lender.
In that scenario, the lender can reclaim the loan, fees and interest by selling the home after it is vacated. Attorney General Marty Jackley encourages seniors to examine all requirements of the reverse mortgage and seek further assistance in making such a significant decision.
"Before entering into a reverse mortgage seniors should understand the types of reverse mortgages that are available, know the costs and fees associated with reverse mortgages, and understand any additional obligations for these mortgages," Jackley said in a news release.
The Attorney General's Office recommends the following tips to protect seniors:
Consult with an independent financial adviser to find out what reverse mortgage package best suits your financial situation and needs.
If you do not have a financial advisor, discuss your situation with a counselor approved by the US Department of Housing & Urban Development (HUD); HUD-approved counseling agencies are available to assist you with your reverse mortgage questions. You can call 1-800-569-4287 to find a counselor in your area.
Make sure you understand all the costs and fees associated with the reverse mortgage.
Find out whether the reverse mortgage you are considering is federally-insured. This will protect you when the loan comes due.
Find out whether your repayment obligation is limited to the value of your home at the time the loan becomes due.
Be wary of anyone who tries to pressure you into a decision that you are not completely comfortable with, such as investing the payments from your reverse mortgage into an annuity, insurance policy, or other investment product, or pressuring you into receiving a lump-sum payment over monthly payments.
Obtain several offers from different reverse mortgage lenders in order to compare different options.
If you would like additional information about these types of offers, contact the Attorney General's Consumer Protection Division at 1-800-300-1986 or by email at firstname.lastname@example.org.
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