Originally Posted by
cathyvv
While I'm not a financial expert, my opinion is that you are better off with a home equity loan. Why? Because while you don't have to pay a reverse mortgage back, you do accrue MORE interest on the reverse mortgage loan every month that it is outstanding. Over time, the interest can raise the amount you owe on your home to more than the home is worth if you try to sell it.
Reverse mortgage is, in my opinion, a 'legal' scam. The guy who advertises it used to be on Law and Order and was a US Senator, Fred Thompson. He actually ran for President in 2008 - got weeded out early. He was, by the way, Senator for TN from 1994 to 2003, and also was a practicing lawyer before getting into acting. He's a smart man, but I can't see that anything he's done in the past qualifies him to give financial advice to anyone. He's basically an unwanted telemarketer who comes into our homes via TV ads.
Having said that, it may be the only choice for those who have no other assets, on a low fixed income and need additional cash flowing in every month to live.
[h=2]Reverse Mortgage Cons[/h]
- The fees on a reverse mortgage are the same as a traditional FHA mortgage but are higher than a conventional mortgage because of the insurance cost. The largest costs are:
- The loan balance gets larger over time and the value of the estate/inheritance may decrease over time.
- Although Social Security and Medicare are not affected, Medicaid and other need-based government assistance can be affected if too much funds are withdrawn (and not spent) in one month. (Note that this could mean that if you need to be in a nursing home, you won't qualify for Medicaid assistance because of the income from your reverse mortgage. )
- The program is not well understood by most individuals. However, the availability of independent reverse mortgage counseling helps.
Thank you for the information - that helps explain what happened to my mother. When my dad died in 2007, their only real asset was the paid off house. Then my mother became unable to take care of herself and my sister took over the finances. She moved my mother into her house and did a reverse mortgage on Mom and Dad's house. She took all the money as a lump sum. I believe she got a check for $90,000, but the mortgage was $110,000 - the difference was fees and interest. My mother died in 2010, we just let the house go back to the lender, Bank of America. They have not done anything with it, but they continue to send statements to my brother with the increasing balance. I believe the balance is now approaching $150,000. The house would probably sell for $60,000 now that it has been ignored for so long. By the way, my sister was being investigated for financial elder abuse by the county when my mother died - that is why my brother now gets the statements. It was a nightmare and if my dad knew what she did to his paid off house, he would be livid. Please stay away from reverse mortgages!!