• Robert Floris CFP, AMP
    Lead Mortgage Agent
    M08004919
    905-966-1453

  • Reverse Mortgages SCAMSAre Reverse Mortgages SCAMS?

    There is a lot of misinformation out there about Reverse Mortgages SCAMS. The reality is that if you think that reverse mortgages are scams, then it would follow that any mortgage is a scam. Why?

    How Conventional Mortgages Work

    As everyone knows, conventional mortgages work this way.

    1. The bank lends you money using your home as security. That’s what makes it a “mortgage” and not a “loan”.
    2. The amortization of said mortgage is set at 25 to 30 years (usually).
    3. You make regular payments. A portion of those payments goes towards interest and another portion goes towards paying down the mortgage.
    4. Less commonly known fact: the bank expects you to keep your property taxes paid up to date AND your fire insurance. In fact, some banks will ask for regular proof.

    And that is a conventional mortgage in a nutshell.

    Now Let’s Compare To Reverse Mortgages SCAMS

    Now that you know how a regular mortgage works, let’s have a look at the workings Reverse Mortgages SCAMS:

    1. The bank lends you money using your home as security. That’s what makes it a “mortgage” and not a “loan”. (Sound familiar??)
    2. There is no amortization because you are not “paying off” this mortgage like a regular one.
    3. You do not make regular payments of towards the principle and interest. That’s because the interest is postponed until you sell your home or you move. The interest rate is higher than a regular conventional mortgage. Why? Because the bank has to wait to get paid – so they charge a premium. Usually it’s only a few percent higher than a conventional mortgage, sometimes less.
    4. Guess what? You need to keep your property taxes and insurance paid up to date!

    What’s the “catch” known as “Reverse Mortgage SCAMS”?

    #4 is usually where people get caught. It is the focal point of people who perpetuate Reverse Mortgages SCAMS.

    If you don’t keep up with your property taxes and insurance, like any other mortgage, the mortgage will be called. That means you have violated your contract and the bank expects to be paid out. Like any other mortgage, you will be required to pay them what is due or sell your home. This is not a scam. This is the reality of ANY mortgage.

    What’s the moral of the story?

    First, you need to meet with a good mortgage broker who is not biased towards or against reverse mortgages. The mortgage broker should first help you decide if a reverse mortgage is right for you. Part of this process is to analyze your situation and make sure you are in a position to afford your property taxes and insurance. Discussing a complete financial plan and budget is an absolute must.

    Please do not hesitate to call or write below if you would like to check if a reverse mortgage is the right product for you.

    Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215.

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    Thanks for reading!