Reverse Mortgage Loan Blog

Regarding the June 22 Associated Press article about reverse mortgages: Contrary to the implications of the article, there are financial advisers who will propose using tax-free reverse mortgage proceeds first, for example, as part of a plan to defer tapping into taxable investments. The reverse mortgage is a new concept and very likely most of its uses in the financial planning world have yet to be imagined.

The suggestion that seniors sell their homes as a preferable way to raise money presupposes that they have somewhere else to live, and misses the point of why reverse mortgages exist. A reverse mortgage is for people who don’t want to sell their homes. Staying in place with a reverse mortgage is very often the best financial alternative.

The high-end closing costs quoted in the article are more than double what we have typically seen in the Lehigh Valley, and the fact that the closing costs (which are financed) are offset over time by low interest rates (currently more than 2 percent under prime) is not mentioned.

The article is correct in saying that if the borrower chooses to receive the money for a fixed term, payments would stop at the end of the term. But it was not pointed out that virtually no one chooses a fixed term and that virtually all FHA reverse mortgage borrowers choose to receive their funds as a line of credit or as monthly payments guaranteed by the federal government for the life of the survivor.

Reverse mortgages allow homeowners age 62 or older to convert part of the equity in their homes into cash without having to sell, move, give up title, or take on new monthly mortgage payments. Although a reverse mortgage is not for everyone, it is a reasonably priced alternative.

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