Is a Reverse Mortgage Right for You?
Excerpted by permission from “There’s No Place Like Home: The Implications of Reverse Mortgages on Seniors in California” an August 1999 special report by Victoria Wong and Norma Paz Garcia of the West Coast Regional office of the Consumers Union.
Consider a reverse mortgage if:
* You have a regular need for additional living funds.
* You live on a fixed income, and your only asset is your home equity.
* You do not plan to leave your home to your children or others who will inherit from you.
Don’t take a reverse mortgage if:
* You want to leave your home, free and clear, to your children or heirs.
* You have another, less costly means to reach your financial goal. A reverse mortgage can be an expensive way to borrow money.
Advantages
* A reverse mortgage can help you maintain your financial independence and an adequate standard of living.
* A reverse mortgage allows you to remain in your home and retain ownership.
* The money you receive from a reverse mortgage is tax-free.
Disadvantages
* Reverse mortgage options can be confusing and numerous. Get counseling.
* Reverse mortgages are more costly to set up than other types of loans.
* Although the proceeds are tax-free, a reverse mortgage may affect your eligibility for certain
“need-based” public benefits such as Medicaid, Supplemental Social Security Income and Medi-Cal benefits.
Question to Ask
* How much money do I need?
* Is there a way to meet my needs that does not involve getting a reverse mortgage?
* Will a reverse mortgage make my partner or me ineligible for any government benefits, currently or in the future?
* Do I qualify for this reverse mortgage?
* How much can I borrow through a particular reverse mortgage product?
* How much will it cost me in fees and interest to borrow this money even if I don’t have any “out-of-pocket” expenses?
* Will I have to sell my house before I die to pay off this reverse mortgage?
* What happens if I die, and my partner is still alive and living in the home; will he or she have to leave or pay the loan off?
* What happens if I have to go to a nursing home; will the loan become due and payable?
* What will I or my heirs have left after the loan is paid off?
* Are there any early-repayment penalties?
* What are my obligations under the reverse mortgage, such as home maintenance, property taxes and insurance?
Resources
American Assn. of Retired Persons (AARP)
Home Equity Information Center
Consumer Affairs Section
601 E St. N.W.
Washington, D.C. 20049
(202) 434-2277
American Bar Assn.
Commission on Legal Problems of the Elderly
1800 M St. N.W.
Washington, D.C. 20036
National Center for Home Equity Conversion
360 N. Robert #403
Saint Paul, MN 55101
(651) 222-6775
Fax: (651) 222-6797
https://www.reverse.org
The center’s Web site has information about the basics of reverse mortgages, history, data, a bibliography, consumer alerts, updates, reverse mortgage lender listings, policy recommendations and other resources.
Consumers Union of U.S. Inc.
West Coast Regional Office
1535 Mission St.
San Francisco, CA 94103
(415) 431-6747
https://www.consumersunion.org
Publications
“Home-Made Money,” American Assn. of Retired Persons (AARP). To order this free publication, contact AARP (see above).
“Retirement Income on the House: Cashing In on Your Home with a ‘Reverse’ Mortgage,” Ken Sonoran, NCHEC Press (1994)
Contact National Center for Home Equity Conversion (see above) to order.
“Reverse Mortgage Choices,” AARP Foundation
Videotape on reverse mortgage information. To order, send $5 to AARP Foundation, P.0. Box 51040 GASD, Washington, DC 20091.
“Reverse Mortgages for Beginners: A Consumer Guide to Every Homeowner’s Retirement Nest Egg,” Ken Scholen
A 132-page book containing the information also available on the Web site of the National Center for Home Equity Conversion. To order, send check payable to NCHEC for $14.95 to NCHEC Web, 7373 147th St. #115, Apple Valley, MN 55124
“Your New Retirement Nest Egg: A Consumer Guide to the New Reverse Mortgages,” Ken Sonoran, NCHEC Press (1996)
A Creepage book containing in-depth analysis of major reverse mortgage programs, comparisons and explanations. Information on ordering is available through NCHEC’s Web site at https://www.reverse.org.
Brochures
“Guarding the Golden Years: Reverse Mortgages,” West Coast Regional Office of Consumers Union. Basic information and consumer tips. Listings for free, confidential reverse mortgage counseling services in the San Francisco Bay Area. Brochures are available in English and Spanish.
“Reverse Mortgages Fast Facts,” U.S. Federal Trade Commission. To order this free brochure, write to Consumer Response Center, FTC, 600 Pennsylvania Ave. N.W., Washington, DC 20580, or call (202) FTC-HELP.
“Reverse Mortgage Locator,” National Center for Home Equity Conversion. A listing of reverse mortgage lenders throughout the country, by state. To order, contact NCHEC (see above).
Product Information
Consumers Union of U.S. Inc. does not endorse any individual reverse mortgage product or lender.
U.S. Department of Housing and Urban Development, Federal Housing Administration’s Home Equity Conversion Mortgage
451 7th St. S.W.
Washington, DC 20410
(888) 466-3487 (toll-free)
* “Money From Home, Fannie Mae.” Describes both the HUD’s HECM and Fannie Mae Home Keeper programs. To order, call Fannie Mae at (202) 752-7000.
* “Home Equity Conversion Mortgage Program,” https://www.hud.gov/progdesc/hecmdf.html
Fannie Mae’s Home Keeper Program
Fannie Mae
3900 Wisconsin Ave. N.W.
Washington, DC 20016-2899
(202) 752-7000
* “Money From Home, Fannie Mae.” Describes both the HUD’s HECM and Fannie Mae Home Keeper programs. To order, call Fannie Mae at (202) 752-7000.
* “Reverse Mortgages for Seniors,” https://www.fanniemae.com/singlefamily/products/markets/emg_reverse.html.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Reverse Mortgage Essentials
Before getting a reverse mortgage:
1. Determine if you really need a reverse mortgage or if another type of loan would be better for you. Depending upon your needs and your financial situation, you may be able to meet your goals with another, less costly financial solution than that provided by a reverse mortgage.
2. See a HUD-approved reverse mortgage counselor--free of charge--to help you decide if a reverse mortgage is for you, or to help you choose among the different types of reverse mortgages.
3. Shop around. Reverse mortgages vary substantially in how much cash you can get, what they cost, and other features.
4. Consider whether a reverse mortgage might make you ineligible for any public benefits you now receive or may be eligible to receive in the future.
For example, if you currently receive or expect to be eligible for any “need-based” benefits such as Medicaid, Medi-Cal or Supplemental Social Security Income, reverse mortgage payments will have to be structured so that monthly payments will be spent within the month they are received.
If not, such payments will be considered “Income,” and may make you ineligible for public benefits. You should contact your benefits provider to ask about how a reverse mortgage may affect your eligibility.
