Well into their senior years, Kenny and Fran Goodnow were struggling to pay their mortgage in 2007 when a salesman offered what seemed like a wonderful solution.
A reverse mortgage would tap the equity in their St. Petersburg, Fla., home to pay off their existing loan and give them extra cash for travel, a new car, a nest egg. Best of all, they could stay in their house.
The couple only had to take care of the property taxes and insurance, barely $100 a month back then.
‘‘He told us you get paid every month instead of you paying the bank,’’ said Kenny Goodnow, now 87.
Soon after, their insurance premium jumped so high they could not afford it. They fell behind on bills. The reverse mortgage company demanded $217,000, or they’d lose their home of 25 years.
[...]
...Most reverse mortgages are federally insured loans that let people 62 and older turn part of their home equity into cash. The homeowners can take a lump sum or get monthly payments, or a combination. Either way, they don’t make monthly principal and interest payments.
When the homeowners move or die, the amount of the loan and the accumulated interest must be repaid. If there is enough equity remaining, the owners or their heirs can sell the home, pay what’s owed to the reverse mortgage company, and keep the rest.
The reverse mortgage company is counting on people not staying in the house for long. And if the house sells for less than what is owed, the Federal Housing Agency takes the loss, not the mortgage company... (emphasis mine)Read the full story HERE.
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