The Consumer Financial Protection Bureau (CFPB) recently conducted a study to measure consumers’ understanding of reverse mortgages. Like many financial options, advertisements and explanations for reverse mortgages found on TV, in print and online depict happy people that are using their extra money to live fuller lives. However, many people do not completely understand what a reverse mortgage is.
A reverse mortgage is a special loan that allows homeowners age 62 or older to borrow against the accrued equity of their homes. According to the CFPB, many people believe a reverse mortgage is a government benefit for senior citizens. However, a reverse mortgage loan must be paid back in full when the borrower dies, moves or no longer lives in their home.
The CFPB study looked at multiple ads and platforms and found that most have incomplete or inaccurate information to describe the loans and that most of the important loan requirements were buried in the fine print, leaving borrowers with the false impression that reverse mortgage loans are risk-free.
Many participants involved with the study did not know that reverse mortgages had to be repaid, that they had attached interest or that they could lose their homes if they did not satisfy the loan requirements.
For more information, visit: http://www.consumerfinance.gov/blog/consumer-advisory-dont-be-misled-by-reverse-mortgage-advertising/.