Holly Glen Gearhart
You’ve seen the ads on TV and heard them on the radio: TV stars from our generation, talking about the advantages of reverse mortgages and having extra money in our pockets to pay off credit card bills or take a well-deserved vacation.
The deal sounds pretty simple; just be over 62 years old, own your home and collect tens of thousands of dollars of the equity your property has built. Order the CD today, get a free disc by phone and get the process underway; soon you will be on the vacation you and your partner have talked about for decades.
Not so fast.
Let’s look at the deal as simply as possible: essentially a reverse mortgage (RM) is a loan on the worth of your home, and as with any loan, the money must be paid back. Your loan comes due when the homeowner passes on or moves out of the home.
What happens to your home if one of you dies or is moved to assisted living? You might find yourself out of luck and on the street. Remember the TV ad; it clearly states “as long as you live in your home.” Upon moving, you might find you have overlooked some of the conditions of the loan and could be left in the lurch, unless you are listed as one of the owners and you are over 62 years old. The RM loan company may end up taking the home unless the conditions are met or someone comes up with the money to pay off the loan.
The deed to your property is going to be key to the decision of who gets the home; if one of you passes on or is moved to a facility (even for medical needs) it does not mean that the other will be allowed to keep the home. Both people must be listed as owner on the deed and must be over 62 years old. Otherwise, the only way to keep the property is to pay off the loan, which could well exceed the market value of the home.
If you do not take the time to review the terms of these loans (or any loans), the survivors; children, grandchildren or spouse may well find themselves on the short end of a deal.
Reverse mortgages can be a wonderful way to have extra cash in your pocket, but as with any contract, be sure you read the fine print; you want that great trip to Italy to be as carefree as possible.
Take advantage of the services afforded to those of us over 55 at the East County Senior Center—free legal advice! Make an appointment and take that contract to a legal mind so they can interpret that legalese!