HUNTSVILLE, AL (WAFF) - If you are a homeowner, taking out a reverse mortgage may seem like an attractive idea, especially for seniors who can convert equity in a home into cash without selling the property.
But if you are considering a reverse mortgage - be cautious. Chances are you've seen commercials or have heard about many companies offering this increasingly popular alternative. It is an alternative meant for a certain demographic.
"This is for people 62 years or older who have equity in their home who may need some money for a home improvement project or something like that, and who can get the money from the equity without having to take out a loan," said Michele Mason, President and CEO of the North Alabama chapter of the Better Business Bureau.
Mason said someone approaching you offering a home improvement project which you can then finance through a reverse mortgage should raise a red flag.
"It may prompt you to give out some sensitive personal information, or in some cases, power of attorney," she said.
Don't be fooled: the only reverse mortgage insured by the federal government is a Home Equity Conversion Mortgage - or HECM. This type of mortgage is only available through an FHA-approved lender.
"HUD offers HECM counselors too," said Mason. "We encourage you to talk to them. Usually it's free, or there is a very small fee. It is a whole lot better than trusting someone you really don't know, who is trying to convince you you need this loan, when it may not be the best thing for you."
For more information on reverse mortgages and how to apply, call 1-800-569-4287 to speak with a qualified HECM counselor.