User:Whaleknives/Reverse mortgage criticism

Reverse mortgage criticism
The most common criticism is that reverse mortgages are more expensive than traditional home loans and the financing costs are higher. But other problems have been noted:
 * Compounding interest over its life means that "the mortgage can quickly balloon". Since no monthly payments are made by the borrower, the interest is treated as a loan advance. Each month, interest is calculated not only on the principal received by the borrower but also on the interest previously assessed to the loan.  The longer a reverse mortgage's term, the more likely it is to exceed the total value of the property. That said, with an FHA-insured HECM the borrower can never owe more than the value of the property.
 * Reverse mortgages can be confusing, and many obtain them without fully understanding the terms and conditions. Complaints were made to Congress that some lenders have sought to take advantage of this. In October of 2010, the National Reverse Mortgage Lenders Association (NRMLA) surveyed 600 owners with reverse mortgages across the U.S., and only 46% of respondents felt they understood the financial terms "very well" when they secured their reverse mortgage. "In the past, government investigations and consumer advocacy groups raised significant consumer protection concerns about the business practices of reverse mortgage lenders and other companies in the reverse mortgage industry." But a 2006 survey of borrowers by AARP showed 93 percent said their reverse mortgage had a "mostly positive" effect on their lives. And the 2010 NMRLA survey reported 56% of seniors with a reverse mortgage would not be able to cover monthly expenses without it.