Monday, December 10, 2012

Is A Reverse Mortgage A Good Thing?

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Due to my line of work -- illness,death and taxes for the middle class -- I often am posed the question is a reverse mortgage a good thing for me?  And of course being an attorney, my answer is it depends. Nothing of quality in the world of estate planning and probate is a one-size fits all program.   It might be a good idea, and it might not.  More information is needed before reaching a conclusion.

If you are wondering if a reverse mortgage is right for you, or for your aging parents, the first step is to gather information and learn exactly what a reverse mortgage is.  Second, you need to apply that information to your specific situation and goals.

A great place to get started is the Consumer Financial Protection Bureau's web site.  I learned about it in the financial column in Sunday's paper.  It is full of great basic definitions on all things financial, including reverse mortgages.  It then provides links to "important questions to ask" and a consumer guide.

Do not, I repeat, do not rely on the person selling you a financial service to provide this information.  Get it from a neutral third-party.  You need information from an entity that will not profit off the sale of this device.  During the housing boom around 2006 I could not believe how many people I heard say "my realtor" or "my banker" said this was a good idea.  Yes, and so would the sales person at the Mercedes dealership trying to sell you a car -- hey, you look great in the red one! They are in sales, they make money be convincing you to part with yours, whether that is a good or a bad idea.

Once you understand what the financial instrument is as well as its advantages and disadvantages, you can then layer it over your situation.  For example, a reverse mortgage works for people 62 and older.  If a couple is married and one is 63 and the other 60, this is probably not a wise option.  Even if the older party took out the reverse mortgage in his/her name only, if s/he dies it is payable immediately.  Not a good thing for the younger spouse.

Proceed slowly, gather information, listen to your gut, and recognize when you are talking with someone who will profit for a sale of an item.  From what I've read, it appears that reverse mortgages work well in limited situations.  And as a naturally frugal person, I would be turned off by the fees, interest, etc.  If it were me asking this question about my own situation, I would examine other options to a reverse mortgage, the easiest being selling the home and putting my assets in liquid form.  But that is just me, I like things simple because it is often less expensive that way.

Please remember that a blog is not legal advice.  Please consult an attorney in your state for advice specific to your situation.  Thanks for reading, and have a great week!

1 comment:

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