Reverse Mortgage Loan Blog

• Q: Are reverse equity mortgages safe? I’ve heard of them but my credit union doesn’t offer them and I can’t find a bank that does. That makes me think they may be a scam. What can Action Line tell me?

M. A.,

Miami

• A: Reverse mortgages are legal and safe — as long as you do your homework. For many seniors who own their homes and want to stay there, they can be a sensible solution to handling increasing property taxes and insurance.

With a reverse mortgage, you borrow money and pledge the equity in your home as collateral. You can receive a lump sum or monthly payments and you never make another house payment as long as you are permanently living in the home. When you die, or if you sell the home, the loan must be paid back in full. (A consequence of this is that your heirs cannot expect to receive the worth of the house.)

To qualify, you need to be at least 62 and have sufficient equity in your home. If the home is owned jointly, both owners must agree to it.

The amount of money you receive depends on your age, the equity in your home and the loan terms, which is why you need to understand what you’re agreeing to. Taxes and insurance remain your responsibility and you must keep the home in good repair.

As in all financial arrangements, there are possibilities for being ripped off, so only deal with reputable lenders. If you are considering a federally insured reverse mortgage, you’ll need to undergo a counseling session with a U.S. Housing and Urban Development-approved counselor. To locate the nearest counseling agency or for more information, call HUD, toll-free, at 800-569-4287 or search www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm.

The AARP is another excellent source for information on reverse mortgages. It has online reverse mortgage calculators at www.rmaarp.com (Spanish, www.rmaarp.com/spindex.asp), as well as a printable educational booklet, Home Made Money, on the topic, at www.aarp.org/revmort. For more information, call AARP’s Reverse Mortgage Education Program, toll-free, at 800-209-8085.

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