Reverse Mortgages Wrong for Some Seniors
Question: I am interested in a reverse mortgage but am not sure that this is my best option. Do you have any information on reverse mortgages?
Answer: Although reverse mortgages are an ideal fit for many senior homeowners, they are not the best option for all of them.
A reverse mortgage would not be in the best interest of someone who intends to make a move in the foreseeable future, the AARP and other sources note. Reverse loans usually come with stiff upfront fees and closing costs of up to 10 percent of the loan amount, which are distributed over the life of the loan. Owners who sell their homes quickly will also lose their equity quickly.
Reverse mortgages may not be suitable for seniors who want to leave a free-and-clear property behind as a legacy to their heirs. At the same time, some experts say elderly homeowners should consider a reverse loan as a way to meet living expenses or settle medical bills while they are alive, without worrying about what will happen when they die. Their offspring still can keep the property by paying off the reverse mortgage with funds from the estate or with their own money, or by taking out a new mortgage.
Experts warn that reverse loans may not be the solution for the youngest seniors, because longer life expectancy qualifies borrowers for less money, or for those in the midst of a temporary financial emergency, who might be better off taking out a home equity line instead.
Finally, another alternative, such as selling the property and using the proceeds to downsize into a smaller house or to rent, might make sense for some seniors.
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442