Reverse Mortgage News

Questions To Ask Before Taking A Reverse Mortgage

March 2, 2008

By CHARLES DUHIGG of the New York Times

Reverse mortgages are complex loans typically available only to homeowners older than 61. They permit owners to borrow against their houses, but they do not require loan repayment until the borrower moves out of the home or dies. Then the loan is repaid from the proceeds of selling the house.

Here are some questions that financial advisers and groups like AARP, formerly known as the American Association of Retired Persons, say potential borrowers should ask before taking out a reverse mortgage:

1. Is a reverse mortgage the best option? Reverse mortgages can be very expensive compared with other kinds of loans, and the amount owed grows every month. Because of these high costs, someone borrowing only a small amount for a short time is probably better served with another kind of loan, like a home equity line of credit.

If borrowers need a large amount, they should consider alternatives to a reverse mortgage. For instance, does it make more sense to sell your house and rent or live off the proceeds after moving to a less-expensive home?

2. How long do you expect to stay in your house? Because the fees associated with a reverse mortgage are high, such loans make sense only for borrowers who expect to live in their home for a number of years. Some financial advisers say anyone who may move in less than seven years should not take out a reverse mortgage.

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