Should You Do a Reverse Mortgage?
Q: My parents are thinking of doing a reverse mortgage. Is this a good idea? What, exactly, are the benefits (and drawbacks) to this procedure?
A: There’s no place like home for our parents, but a reverse mortgage can be an option for some situations. First, let me explain exactly what a reverse mortgage is. The name says it all: A reverse mortgage pays a monthly sum of money to you, rather than you making a monthly payment to the mortgage company. The amount that can be borrowed varies according to age, value of the home, current interest rates and loan fees. It does have its benefits, but in order to qualify you must:
-be at least 62 years of age
-live in your home
-have equity in your home
Benefits
-Monthly income for medical or other expenses
-Lump sum or lines of credit to pay off bills or create an emergency fund
-Parents keep ownership of home
-No minimum income required
Drawbacks
-Cashing out the equity in your home
-Interest, origination fees and points (this is negotiable)
-Payments of home repairs, insurance and taxes must continue.
Know the facts before making a decision on a reverse mortgage. Check: reversemortgageguides.org; wellsfargo .com.
Gail Perry-Mason, a regular contributor to Heart & Soul, is co-author of Girl, Make Your Money Grow!
If you are in a reverse mortgage, will you be able to give your family an inheritance when you are gone?