A reverse mortgagee who was not properly educated about the loan she got herself into caused serious financial concerns and apartment instability for such a loan.
This was said by financial media personality and advisor Suze Orman, who spoke on her podcast “Suze Orman’s Women & Money” last week. Orman, who describes being contacted by a senior who was not fully aware of the financial implications of a reverse mortgage loan, describes to her audience the importance of educating yourself as well as possible before embarking on a complex Financial product involved.
“I got another email from a 71-year-old woman” [years old], and this one breaks my heart because there’s nothing I can do about it. And we must have gone back and forth, her name is Carol, and we’ve gone back and forth maybe 10 or 15 emails, ”Orman describes the borrower. “[S]he has severe COPD and she only has an income of $ 1,500-1,600 a month, that’s it. “
Since this borrower was not specially trained in finance, she had to make important financial decisions after her husband died, with $ 53,000 remaining on her mortgage loan balance. Orman describes how the borrower receives a call from “someone” who “convinces”.[d] they want to take a reverse mortgage, ”believing that their financial situation will be improved without having to make prepayments on the mortgage.
“What she didn’t understand is that if you take out a reverse mortgage, if you owe money on your house, part of the reverse mortgage proceeds will be used to pay off the mortgage you have on the house. “So now the house is free and free, and you owe the reverse mortgage that money, so to speak, because it depends on the amount of money they are going to give you.”
After Orman loosely explained how a reverse mortgage works in general, Orman describes that the borrower who reached out to her was unaware of any of these specifics, including the fact that the initial $ 53,000 in loan proceeds would be used to pay off her existing forward mortgage, and that she said it would only be able to access about $ 8,000 a year.
“So now she’s stuck in this house with no money and she doesn’t know what to do,” Orman says. “And we’re trying to get her out of the reverse mortgage. I connected her to the reverse mortgage expert in the United States and got her out because the person never explained what he was getting into. Because now, if we sell the house, all of a sudden she owes $ 90,000 on that reverse mortgage. The house is only worth $ 148,000 so she’s only going to get $ 60,000 and she can’t do anything with that now. If she had just sold the house from the start, we could have found out from there, because owning a home is expensive. “
Orman goes on to say that she later found out that the borrower was in arrears with their utility payments, further complicating matters.
“It’s better to do nothing than do something you don’t understand, which is why this podcast is really the most important podcast out there today,” Orman said. repeated previous feelings She’s talked about reverse mortgages in the past. “Because the whole goal of this podcast is to educate you about what you should be doing, but also what you shouldn’t be doing. And just doing something for it doesn’t make sense. “
In the podcast segment, no information was given on the timing of the reverse mortgage issue, which may have given additional context to the regulatory environment and the advisory requirements that the borrower may or may not have had to provide.
Listen to the podcast episode.