Sherwood: Reverse mortgage may help
By Susan L. Sherwood / Wayland the Way
For a number of older American homeowners, reverse mortgages may seem too good to be true. And in some cases, they are. Nonetheless, they can provide a real lifeline for many people.
As with any transaction involving money, senior citizens and opportunities to profit from the deal, reverse mortgages are complicated, the pitfalls are many, and the scam artists are waiting in the wings.
On Wednesday, at 10 a.m., the Wayland Senior Center will sponsor a presentation on the subject by Joseph DeMarkey from BNY Mortgage. His talk is free and open to the public. Before you go, however, it would be wise to do some basic research. Meantime, I've done some for you, and, as space allows, here is my report.
The U.S. Department of Housing and Urban Development (HUD) created one of the first reverse mortgage programs in the country. And the department continues to provide free information on the topic. Another reliable source is the American Association of Retired Persons (AARP).
Simply put, a reverse mortgage is an instrument through which a senior can borrow against the equity in his or her home in order to access funds. The lender gives the borrower a lump sum, monthly payments, or a line or credit; and the loan is generally not repaid until the borrower moves or dies.
To qualify for a reverse mortgage, you must be at least 62 years old, the mortgage on your home must be fully or nearly paid off, and you must occupy the property you are seeking to mortgage.
The Consumers Union (CU), which publishes the highly respected "Consumer Reports," says reverse mortgages may involve the following hazards:
- High costs, often leading homeowners to owe much more than they borrowed.
- Complex contract terms that may increase overall costs and are often not fully disclosed.
- Numerous fees.
- Misleading financial counseling.
- Adverse impacts on need-based government benefits, such as Medicaid and Supplemental Social Security Income (SSI).
- "Estate planning" fee scams.
The CU continues that, a reverse mortgage may be right for people who:
- Have a regular need for additional living funds.
- Live on a fixed income and whose only asset is their home equity.
- Do not plan to leave their home to their heirs.
The money from a reverse mortgage generally is tax-free and the amount will be higher the older you are. On the other hand, there may be less expensive ways to raise the cash you need. Both the CU and HUD stress the importance of getting the free counseling that is available from HUD before you move ahead with a reverse mortgage. The counselor will help you decide whether a reverse mortgage is your best option and help you choose among the different types of programs available. You can call 1-800-569-4287 for the name and location of a HUD-approved housing counselor near you. You might also want to check the AARP, CU, and HUD Web sites http://www.aarp.org or www.consumersunion.org, or http://www.hud.gov respectively).
Source: MetroWest Daily News
