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Is a Reverse Mortgage right for you?


Short answer, it depends! I’ve written about reverse mortgages here before – mostly about how they can blow up the best laid plans by people not fully understanding what they’re doing – thus, unexpected consequences from misunderstanding.

So this piece is about getting to understand them so you may be able to use the untapped value in your home equity for some needed income, etc.

What are they? According to the Federal Trade Commission … and according to HUD … and according to Consumer Financial Protection Bureau.

Before you can shop to get one, you must be counseled about reverse mortgages (www.hud.gov and search for find a HECM housing counselor in search box).

You can find various calculators online and there’s one on HUD’s website too or at reversemortgage.org.

You can use reverse mortgages to BUY a different home too, as long as that one is your primary residence. If you don’t have enough money through the reverse mortgage to buy at the total price, you come up with the difference out of your funds (IRA or other accounts) to pay the difference.

Key thing for spouses to understand, is that whoever’s name the reverse mortgage is in IF you’re trying to get more money out, is that this is risky to the other spouse should the named borrower die in the wrong order (goes first) … the survivor will have to repay the reverse mortgage immediately (i.e., sell the home unless other funds are available to repay)! SO … don’t do it in just one name; borrow in both names is the general rule so the survivor can keep the reverse mortgage benefits going.

Here is a discussion about the many factors that go into determining how much one may receive through a reverse mortgage.

There have been many changes over the years improving on reverse mortgages. However here are  links to other cautions, etc on the topic.

 

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Comment   |  2 years, 7 months ago from Roseville, CA