Well, we hear it often enough, but is a reverse mortage good for everyone...?

No, not for everyone. The idea of not making mortgage payments and staying in your home until you die is great, but, for one thing, a reverse mortgage won't pay for full time care in your home should you need it...

Let's indicate someone is to live another ten years and now pays a mortgage of $300.00 a month, $3,600.00 a year and $36,000.00 for ten years. This person has a home value of $150,000.00 with an equity invested at 50% (75,000.00). Getting a reverse mortgage would be no problem here but dying in ten years would be outright robbery for the financier...

It would seem best to borrow against the equity, put that money in an interest bearing account and then have the mortgage payments, taxes and insurance withdrawn automatically... The estate at death will still have an equity of $39,000.00 ($75,000.00 less $36,000.00) from year one and gain back more each following year. The only difference will be having to pay the interest against the equity loan less the interest earned from the loan being in an interest bearing account...

Now, this is just an example, and does not apply to everyone. It's simply a classic example to provide reason to seek advice from more than one person...

Meanwhile, from all I have read, indications are that no company wants to give a reverse mortgage beyond 40% of a property value unless the equity is much higher...

Is it complicated...? Yes, and lenders are inconsistant. My suggestion is that if anyone is considering a reverse mortgage that they speak to their bank financial officer and also seek further information and financial terms from a financial retirement specialist...

Sandra...



Edited 1 time(s). Last edit at 04/03/2010 06:04AM by Sandra.