Reverse Mortgage Loan Blog

DEAR BRUCE: We are a childless couple in our early 70s. We have a good deal of equity in our home. We could live better and travel more if we had more “money.” We are bombarded with mailers and ads on television about reverse mortgages. When is this a good idea and for whom? How does it work? – R.J., via e-mail

DEAR R.J.: Reverse mortgages can be very useful tools or very damaging, depending on the individual. You seem to be an ideal candidate. You have reached your 70s, which is the minimum age a reverse mortgage should be considered. The older the person taking out the mortgage, the more money the lending company is willing to provide given your longevity being actuarially shorter. You also have mentioned you have no children. Oftentimes, people are reluctant to go into a reverse mortgage because it would reduce the estate they could leave. Given that this is not a variable in your case also mitigates in favor of the reverse mortgage. You should know that the interest rates are going to be a bit higher and there are other charges that you will have to pay. In addition, the current mortgage on your home will have to be retired. There are legal limits as to the amount of money that can be loaned predicated on housing values in your county. All of these things considered, you might wish to talk to your bank or lender who processes reverse mortgages. You should know that no matter how long you live, as long as the taxes are paid on the home, you have a right to stay there without regard to how much money you have withdrawn from the lender. This is an excellent method of allowing people to stay in their homes and spend a portion of the equity that they have earned during their lifetime. Take into account some of the variables I have mentioned. In your case, I’d say go for it.

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