CONSIDERING A REVERSE MORTGAGE

Larry, I am thinking about doing a reverse mortgage. I think I understand all of the positive sides. Are there any negative sides to doing this?
Abe

Abe, as you know there are some positives to a reverse mortgage. They are a very good vehicle for certain individuals that are retired that have built up a lot of equity in their home, but are not ready to sell their house. You say that you know the positives so I will just tell you some of the things that we watch out for:

• Expect to pay some hefty fees. Many times we see an origination fee for as much as 2% of the mortgage and then additionally some fees on the balance.
• If you are a younger borrower, there are some big risks. If you live longer than you participate, you could possibly run out of money and won’t have any home equity to fall back on. Over the last decade, the average age of the risk mortgage borrower has fallen from 76 to 72. At age 62 this could cause a problem.
• There are other options that might work better for you. Even though you’ll have some counseling, which is required for first mortgages, taking out a home equity line of credit or downsizing your home might be an answer.
• You may not be able to borrow as much as you think. You will not be able to tap your home for its full price. There is a formula on the amount that you can take on depending on your age and other factors.

Before you determine if a reverse mortgage is right for you, we really would have to know your exact circumstances. You should discuss this with your financial counselor. If you are a client of the firm, please get in touch with me. If you are not a client of the firm, you should discuss this with your representative.