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How reverse mortgages could backfire for many retirees

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Defaulting on insurance or property taxes isn't the only issue.  


Another that I have seen raised is from the future heirs.  Often the grandparent/parent takes out the reverse mortgage and says nothing to the children/grandchildren.  They go on believing they will inherit the family home only to discover when Grandma passes or moves to a nursing facility they have to pay for it if they wish to retain it.  I have seen angry letters in financial columns claiming predatory lending when in reality the home owners got full value for the mortgage and now that the end (figuratively and literally) has come the home will revert to the lender unless the heirs pony up to pay off the mortgage.  They don't think its "fair" when in reality there is no legal requirement the home owner bequeath the home to them.  

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From what I've seen, you never get anywhere near the amount of money the house is worth if you would just sell it. However if you have no other assets but still need a place to live, it's one of those last-ditch options. 


A reverse mortgage is a terrible financial decision that basically transfers a large portion of your equity to the bank. 

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