When Does a Reverse Mortgage Make Sense?

Everyone sees those TV commercials featuring sincere celebrities pitching reverse mortgages. If you are 62 or older, chances are you’re also subjected to glossy mailers (and even DVDs!) that show up in your mailbox at regular intervals. 

 

Latest stats show that approximately 83% of baby boomers plan to stay in their homes during retirement. That may be why some Houston homeowners who have built equity in their homes may be paying attention. 

You can’t blame them if they have one overriding question -- is this some kind of scam?

Essentially, a reverse mortgage is just one way to tap into a home’s equity regardless of the owner’s credit score or income. Under a reverse mortgage, borrowers receive a monthly payment, line of credit, or lump sum. Although the borrowed amount accrues interest immediately, borrowers don’t need to repay anything until they move or become deceased – at which point they (or their estate) repays the loan plus interest.

Elder law attorney Janet Colliton believes a reverse mortgage can be a useful financial tool for homeowners aged 70 or older committed to remaining in their homes…if they lack the financial resources needed to comfortably cover their living and medical expenses.  

However, for Houston homeowners younger than 70 (who can expect a longer retirement), or who would elect to take the cash in a lump sum, there is a clear red flag. In either case, a reverse mortgage increases the risk of running out of cash - and home. Additionally, for homeowners who have not yet built equity in their home, a reverse mortgage is not available.

If you are starting to consider your retirement plans and would like to survey all of your options, I am happy to meet to go over the buying and selling alternatives that will work best for you. You won’t know until you’ve run the numbers -- call me anytime to begin the discussion. 

	Diego E. Jaramillo Broker Associate, CIPS, ABR diego@houstonheritage.com	Jair A. Jaramillo Real Estate Consultant jair@houstonheritage.com
	Houston Heritage Group Keller Williams Realty - The Metropolitan Office: 713-980-5115 Fax: 832-603-4304 Website: www.HoustonHeritage.com Facebook: www.facebook.com/HoustonHeritageGroup Twitter: www.twitter.com/HoustonDiego Blog: www.TheHoustonBlog.com