Familiar old actors pitch TV ads to aging homeowners about how great it is to get a reverse mortgage. Senior citizens Robert Wagner, Henry Winkler and Tom Selleck offer compelling reasons why old you, age 62 and above, should take that financial step.
If you agree, they insist with honest smiles on their craggy faces, a reverse mortgage will provide enough income to allow you to enjoy old age without financial worries. Actually, despite the creepy hype, that could happen under the right circumstances. However, a reverse mortgage isn’t always a simple financial solution.
What the hell is a reverse mortgage? It’s a finance company loan that permits you to give up your home ownership in exchange for instant cash or regular monthly income. The lenders determine just how much your home is worth before granting the pay-out.
What’s good about reverse mortgages? The primary benefit is that you may continue to live in the home for the rest of your life. It can be ideal for a retiree who has very limited income and needs monthly cash to pay taxes, bills and everyday expenses.
The money you receive from a reverse mortgage is usually tax-free. Further, it isn’t necessary to be in urgent financial need. It could be used for travel, a new car, gifts to family or however you want to spend during your twilight years.
What ain’t so good about reverse mortgages? The loan company isn’t giving away money out of generosity. It’s gambling on you to kick the bucket within a relatively short time, so it can own and sell the home at a profit.
Possibly the most negative aspect of taking a reverse mortgage is that the home cannot be bequeathed to a family member or anyone else. This may be a major concern when you own a valuable house, a condo or other substantial property.
Under a reverse mortgage, after you’re gone, it all belongs to the money lender. It begs the question. With today’s real estate prices already inflated and getting more so, would you prevent your loved ones from living in or profiting from the sale of your property?
What to do about it now? Before signing for a reverse mortgage, consider all aspects, both positive and negative. Speak with a trusted banker and/or financial adviser. Be sure your current lack of money situation may make the transaction necessary, so you can afford to continue a comfortable lifestyle.
While considering a reverse mortgage, also consult with concerned family members and discuss all aspects of the reverse mortgage. If there’s no one to inherit the property, and you’re currently in serious financial need, that could make the decision to accept the deal fairly simple.
Finally, if the pitch from the money lender sounds too tempting, don’t grab it until you’ve seriously considered all the positive and negative aspects of the deal.