A Retirement Resources Blog for Seniors and Retirees – HOME

Understanding if a Reverse Mortgage is an Option for You?

How it works: If you’re at least 62 and own your own home, you can tap your equity by taking out a reverse mortgage. You’ll need an appraisal, an inspection, a mortgage broker, and a lender-just as you do for a traditional mortgage. Payments on the loan, however are reversed: the bank pays you.

The amount you get depends on your home’s value and location, current interest rates, and, if there are co-borrowers, the age of the youngest one. As you dip into your reverse mortgage your debt increases and interest is added to your loan balance. The loan comes due when you die, sell or move away permanently.

Reasons why this may be a good option: you are not able to make ends meet, you need home health care for you or your spouse, you are on a waiting list for an Assisted Living, due to market conditions you are not able to sell your home.

Pitfalls:

If you take the money all at once or let your monthly advance build up in your bank account, your eligibilty for Medicard and Supplement Security Income may be affected. “If you tap your home equity through a reverse mortgage and use it now for, say, a vacation, your nest egg won’t be there if an urgent medical or other need arises later,” says Jurgens.  Be wary of any salesperson who tries to get you to use a reverse mortgage to finance an annuity or long-term-care insurance. The seller will likely pocket a big commison, and after factoring in the cots of a reverse mortgage, you are almost sure to lose financially,” says Jurgens.

Reverse mortgages are not for everyone. Wesley Homes recommends that you speak with your own financial advisor further about this topic.

This entry was posted on Thursday, February 19th, 2009 at 12:29 pm and is filed under General Info. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.