Are Reverse Mortgages Good For Seniors?

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  • April 6, 2016

If you’re 62 years or older and want money to pay off your home mortgage, have more cash on hand or want to pay for healthcare expenses, you might want to consider a reverse mortgage.  However, before doing so, one must consult with your financial expert, accountant, and lawyer.  A reverse mortgage can be complicated and might not be right for you.

Reverse mortgages take part of the equity in your home and convert it into payments to you.  Generally, you don’t have to pay back the money for as long as you live in your home.  When the last surviving borrower dies, sells the home or no longer lives in the home as a principal residence, the loan has to be repaid.  That could mean that the home has to be sold to get money to repay the loan.

Before you get a reverse mortgage, think about the following points:

**There may be origination fees, closing fees and loan servicing fees associated with the mortgage.

**As you get money through the reverse mortgage, interest is added to the balance you owe each month.  That means the amount you owe grows as the interest on your loan adds up.

**Most reverse mortgages have variable interest rates which are tied to a financial index and change with the market.

**Although you keep the title to your home, you are responsible for property taxes, maintenance and other expenses.  If you don’t pay these expenses, the lender may require you to repay the loan.

**Ask the lender about your spouse remaining in the home after you die if he or she doesn’t sign the loan paperwork.

**Reverse mortgages can use up the equity in your home which means fewer assets for you and your heirs.

**Compare the options, terms and fees from various lenders and speak with your lawyer and accountant before making any decision concerning a reverse mortgage.  Also, with most such mortgages, you have at least three business days after obtaining the mortgage to cancel the deal for any reason without penalty.

Source:  Federal Trade Commission

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