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Beatrice Said:

Reverse Mortgage pros and cons?

We Answered:

Whether or not a reverse mortgage is good for you depends on your needs and priorities. Basically, a federally guaranteed reverse mortgage (which is what most people get) will provide you with a loan equal to about half the equity in your house. Take the value of your house, subtract any mortgage or home equity loan you already have, and the reverse mortgage loan would equal about half the remaining equity. You can get the reverse mortgage funds in monthly payments, a lump sum or a line of credit.

You won't have to repay the reverse mortgage until you move out of the house permanently, sell the house or pass away. So you get to stay at home, and live on the funds.

The price of this loan includes high fees paid up front, and the likelihood that your heirs will inherit little or nothing from the house. Since repayment of the reverse mortgage is delayed for a number of years, the amount that must be repaid will probably greatly exceed the amount of the loan (because a lot of interest accrues while you live in the house without repaying the loan).

Those are the basic tradeoffs. If you are cash poor but house rich, and want to live in your current home, a reverse mortgage could make sense for you. But understand that your heirs probably will get little or nothing from that house. If you just need money to live on and don't need to stay in your current house, you might want to sell the house, buy a smaller place for cash, and live on the remaining cash. If the numbers work out right, you could leave the smaller home for your heirs (if that's something you want to do).

Velma Said:

What r the pros/cons 2 a reverse mortgage ?

We Answered:

pro - you can take out all of the equity in your home

con - the lien on your property increases monthly. If you own your property outright, you will basically be selling the rights to your property to the reverse mortgage lender after you die.