Is a Reverse Mortgage Right For Me?

Reverse Mortgage?  The TRUTH You Can Use To Protect Yourself

Have you seen distinguished actors Fred Thompson and Henry Winkler marketing reverse mortgages on TV recently?  While we love The Fonz and Thompson’s Law & Order DA was a straight shooter, don’t fall for the hype, know the facts before you call that number that’s scrolling across the bottom of your screen. 

Certain facts are indisputable.  What is a REVERSE MORTGAGE?

·         You own your home

·         You have a significant amount of equity

·         You want either a lump sum, an equity line, or a monthly payment

·         You don’t make monthly payments

·         A company specializing in reverse mortgages is willing to comply with your wants and desires

Financing your retirement with debt is a huge mistake! Debt is NEVER a winning decision - especially later in life when your future, let’s be honest, is less certain than it has ever been.

You still pay for property taxes, insurance and the costs of maintaining the home. The lender can foreclose if you don’t.

Interest accrues over the life of the loan, your debt can ultimately exceed the value of your home. If you sign for a reverse mortgage at 62 and live to 102, you’ll have FORTY YEARS of accrued interest that you’ll leave to your heirs, which will EASILY exceed the value of your home.  Your children, your grandchildren, will be left with this bill. 

You don’t make monthly payments, but if you sell the house or move out for more than a year, the loan is due and the income stops. If the house is sold upon your death, proceeds go to pay the loan, and any outstanding debt owed will then go to your estate.  Your children.

End of life expenses.  I know, we don’t want to think about those things, but what happens when you sell the rights to what you’ve worked for, and then you need the proceeds of the sale of your home to pay for a hospital stay, a retirement home expense, or other medical need?  Chances are you’ll need that equity you’ve built, don’t sell it for short term gain and end of life slavery to debt.

Fees!  These companies don’t work for free!

• Origination fee
• Standard closing costs
• Mortgage insurance premiums for coverage to make up the difference if your home doesn’t sell for enough to pay the loan
• A monthly mortgage insurance servicing fee
• Fees for mandatory credit counseling, which you pay whether or not you get the reverse mortgage

Interest rates on a reverse mortgage are adjustable unless you take your money in a lump sum. You are also required to take a loan for the maximum amount you qualify for.

Finally, the misleading advertising is easily debunked…….

• Lifetime income – Income from a reverse mortgage stops if you sell your house or move (even to a retirement home, nursing home, extended hospital stay, etc.)
• Never lose your home – You can lose your home if you can’t afford to pay taxes, insurance, or maintain the home.
• Never owe more than the value of your home – If your loan exceeds the value of your home, you or your heirs will have to make up the difference if the home isn’t sold when the loan is due.
• False implications that a reverse mortgage is a government benefit rather than a loan – Some lenders even use government logos to convince you to buy.

Be safe.  Read the fine print.  Talk to someone who is in the mortgage industry who DOESN”T sell reverse mortgages before you make a decision.