Reverse Mortgages – The New Retirement Plan?

In today’s economy, are reverse mortgages the way for seniors to recoup their lost retirement funds? In some instances the answer may be yes and the numbers do prove that retirees are leaning toward using reverse mortgages to bolster their flagging funds. HUD states that Home Equity Conversion Mortgages (reverse mortgages) have increased 77% percent in the past year. A lot of this is due to advertisements and television commercials that make them appear to be the simple way to get additional money. What many seniors do not realize is that they will be hit with some pretty high costs for the convenience.

Front-loading (or up-front) costs are extremely high with reverse mortgages. The closing costs are the highest in the industry and in addition the home-owners will still be responsible for real estate taxes, home repairs, home owners insurance, and mortgage insurance which will be required. These costs can add up to much more than what was anticipated when reverse mortgages were looked at as a solution. One other thing most seniors do not consider, reverse mortgages can impact Medicare benefits because the money generated is considered to be an asset.

A home-equity loan may be a better choice for some people. The rates will be lower and the remaining equity in the home is not subject to interest as it would be with a reverse mortgage. But, using the equity in the home should be a last resort decision for everyone. Many seniors will find themselves encumbered with bills far greater than the relief the loan or reverse mortgage generated. The best thing for a person considering a reverse mortgage (or any home equity type loan) to do is seek advice from a consumer counselor. These counselors are always unbiased and are usually well-versed in the services and opportunities available within the community. Many people intending to get a reverse mortgage have found that there are resources available for seniors that can alleviate the need to even consider a reverse mortgage.

Reverse mortgages are a viable choice if there are no other choices available. But there are a lot of additional costs and responsibilities that come along with the service. With unscrupulous people out there trying to separate seniors from their money every caution should be taken. Seniors need to be proactive and ask questions and continue asking them until they understand all aspects of the loan. Taking an advocate into loan negotiations will provide a buffer between being pressured into something that may not be fully understood. Caution should always be used regardless of how attractive an offer may appear to be at first glance.