REVERSE MORTGAGESAcross the country, rising bills, fixed incomes, increased taxes, and poor-performance investments have driven increasing numbers of older homeowners to spend down their home’s value in order to defer certain payments until they move or die. This process, known as reverse mortgage, requires that the bank send the check to the borrower who continues to own and hold title to his/her property for the duration of the loan. Money can be received in a lump sum, as a fixed monthly payment, as a line of credit to be drawn on over time, or as a combination of all three. And as with a second mortgage, it can be spent on anything--to help to avoid nursing homes, pay bills, pay for home health care nurses, prescription drugs, or for quality of life items such as a vacation or home repair/remodeling jobs. With interest rates still low, reverse mortgage may sound enticing; however, there are risks which can include: adjustable monthly interest rates; high closing costs ($8,000-$10,000) and possible service charges of up to $35./month; expensive insurance plans to cover the difference if the property is worth less than the loan when it is sold; having little or no home equity at a time in the future when you will really need it; having less money to leave to your children; being ineligible for Medicaid or state assistance programs. Significantly, federal law requires all borrowers to consult a government -approved counselor before proceeding with a reverse mortgage. And as always, your accountant can help to determine if this is a wise option for you. AMERICAN HERITAGE REALTY |
|
