â€œBy drawing attention to this despicable lending practice, I hope to help seniors avoid becoming victims,â€ said Lyn R. Link, president of the Reverse Mortgage Critic.
Reverse mortgages allow homeowners to borrow against the equity of their home with no monthly repayment of principal interest for as long as they live in that home. But in that process, seniors who choose a fixed rate end up with a higher rate than adjustable, as well as less flexibility and greater risk for fraud, said the news release by the Reverse Mortgage Critic.
Lenders make as much as two to three times more from the fixed rate option than the adjustable rate, said the release, something they are fully aware of when advising seniors.
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The Reverse Mortgage Critic said lenders seeking more profit are encouraging seniors to go with fixed rates on reverse mortgages, pulling an average of $131,000 in lost home equity from a borrower. In just nine months, the percentage of reverse mortgages that were fixed rate in the U.S. went from 2.7% to 68.9%, according to the news release.