Wednesday, August 15 , 2018, 4:47 am | Fair 65º

 
 
 
 

Letter to the Editor: The Dangers of Reverse Annuity Mortgages

Reverse annuity mortgages that allow seniors to take cash out of their homes and not make any payments during their lifetime are currently being highly promoted through television, the Internet and other advertising. What a beautiful pitch — take cash out of your home up to 90 percent of its value and never have to pay it back. No restriction on the use of the funds at all. If it sounds too good to be true, it is.

The reason these loans are so highly marketed is because the commission and fees on these loans are huge! Mortgage brokers and lenders make way more money on these loans than traditional conventional financing.

Does anyone think an insurance company or lender would offer and highly promote a product unless it was going to make them a pile of money?

If a senior homeowner is not interested in leaving an estate with value to their children, perhaps not a bad idea. However, there is a better way, but it requires family planning.

Many seniors qualify for conventional financing and don’t need a RAM to get the cash that they need. Conventional financing offers much better terms, lower costs and an option to get cash out. If the senior homeowner doesn’t qualify, this is where their children might be able to help out in order to get the loan.

My suggestion is that before someone enters into a RAM they should consider consulting with a CPA or CFP to see what other options might be available. With some careful planning, the senior homeowner gets what they need and the family house is preserved and can be passed on to the children or grandchildren. 

It is my opinion that many senior homeowners that obtain RAMs are victims of a form of elder abuse because there is no way they can understand this very complicated transaction and its ramifications. 

Stephen Wheeler, CPA and mortgage broker
Santa Barbara

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made through Stripe below, or click here for information on recurring credit-card payments and a mailing address for checks.

Thank you for your vital support.

Become a Noozhawk Supporter

First name
Last name
Enter your email
Select your membership level
×

Payment Information

You are purchasing:

Payment Method

Pay by Credit Card:

Mastercard, Visa, American Express, Discover
One click only, please!

Pay with Apple Pay or Google Pay:

Noozhawk partners with Stripe to provide secure invoicing and payments processing.

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.

Daily Noozhawk

Subscribe to Noozhawk's A.M. Report, our free e-Bulletin sent out every day at 4:15 a.m. with Noozhawk's top stories, hand-picked by the editors.

Sign Up Now >