There has been a lot of news about reverse mortgages. Some of the news has not been very good.
A reverse mortgage allows a homeowner over the age of 62 to get a loan, against the equity in a house. The mortgage does not need to be paid off until a borrower sells the house, or dies.
The advantage of the reverse mortgage is that you get some of the equity out of the house, in the form of cash.
Unfortunately, there are many disadvantages to a reverse mortgage. The loan has to be paid back with interest at a later date. Therefore, if you want to sell your house, you may be surprised at the amount of the loan payoff.
The loan will require you to continue to pay the taxes, and any other charges which can become a lien on the property, such as water and sewer. Borrowers have lost their home because they failed to pay the real estate taxes and this was considered a default on the reverse mortgage.
Unlike a sale in which you get 100% of the sales price after closing costs, with a reverse mortgage you will get far less money. The lender wants to protect its investment in the reverse mortgage. Therefore, you may only receive 50% of the value of your residence as proceeds from a reverse mortgage.
If you later die, the remaining amount of equity in your home may be used to pay off the reverse mortgage interest, which you didn’t pay during your life.
Example – you take out a reverse mortgage at age 65, and receive $100,000
If you die at age 82, the mortgage amount due with interest will increase to over $200,000, with a 4.5% interest rate
The house will then be sold to pay off the reverse mortgage, with little money left for your children or other close relatives and friends.
Many times, it is better to sell property and use the proceeds for living expenses. Keeping property is expensive, even without a mortgage payment. And the reverse mortgage may not give someone enough money to keep a property for the rest of his or her life.
If you are having problems with a reverse mortgage, please feel free to contact Attorney Singer.
Attorney Robert M. Singer
Law Offices of Robert M. Singer, LLC
2572 Whitney Avenue
Hamden, CT 06518