A reverse mortgage is a home equity loan without a payment. You do not repay the loan as long as the home remains your principal residence. Your income and credit rating is not considered when qualifying for the loan. The writer is a reverse mortgage expert.
On the other side of the housing ledger are the “absolute need” households where the cost of obtaining a reverse mortgage cannot be measured simply by the interest rate and fees charged on a line of credit. That’s what Wells Fargo’s Jeff Taylor was referring to in the Introduction of this book when he responds, “Compared to what?” when faced with defending the seemingly high cost of reverse mortgages. If you sell your home and pay the closing costs, could you find another home with the same amenities and friendly neighborhood as your present home? What price do you assign to relieving the anxiety of a maxed-out credit card? How do you quantify the ability to purchase needed medications?
Obviously, we cannot predict when we are going to die. However, try to take a shot at guessing how long you will stay in your home. Unless you are in a desperate situation and really need cash, it probably will not make sense to obtain a reverse mortgage if you are going to stay fewer than four years. That’s because of the fees involved. If you plan to stay longer, and a growing number of people plan to do so, the reverse mortgage could be a viable option.
What financial planners and accountants often underestimate is the ability of the homeowner to retain home appreciation during the term of the reverse mortgage. Three-bedroom, two-bath homes containing 1,250 square feet in Westchester, California, near the Los Angeles International Airport, were selling for $385,000 in 2000 yet were back on the market in 2004 at $545,000-and heading higher. While these soaring home prices are the biggest challenge to first-time buyers in this country, the increased values could be a boon to elders who couldn’t care less how much their home is now worth-they simply want to stay in it.
The writer is a reverse mortgage broker in Canada. He specializes in reverse mortgages to help seniors life their life in dignity. Reverse mortgages can greatly assist the elderly in living their lives to the fullest.