Are you a “house rich and cash poor” senior citizen? If so, no doubt you’ve thought about getting a reverse mortgage to help make ends meet each month. However, you also have to consider if the cure worse than the ailment! You can’t watch daytime TV without seeing a commercial for reverse mortgages. The pitch sounds good, but is it? Who couldn’t use a big fat lump sum payment or a nice, monthly check from a reverse mortgage company? On this MoneyWise, financial planner and teacher Rob West has some alternatives to reverse mortgages.
To get this money you’ll be giving up equity in your home. This bothers a lot of seniors who’d like to leave something to their heirs—not to a mortgage company. Remember: what sounds good doesn’t always work out. Reverse mortgages typically have higher interest rates and other costs.
You really have to know who you’re dealing with. Reverse mortgage companies haven’t always lived up to their promises. A couple of years ago, the Consumer Financial Protection Bureau fined three of these companies for deceptive advertising. Consumer Reports says you should consider a reverse mortgage only if there’s no other way to stay in your home and to pay your bills.
There are alternatives. (1) Sell your home and buy something smaller, leaving you with the difference in cash. (2) If you haven’t entirely paid off your home yet, consider refinancing the balance you owe. Interest rates are still low enough that you could reduce your monthly payment and free up cash. (3) Sell the house to a family member. Perhaps sell it to children who would be heirs anyway. This way, you get cash out and then you can lease it back and continue to stay living there. The family member can then take advantage of tax breaks for landlords. (4) An inter-family mortgage. The family member buys the house from you, then you “owner finance”—they make the monthly mortgage payment to you instead of a bank (giving you cash to meet your expenses).
On this program we also answer your questions:
I’ve been blessed to have some extra money each month above my budget. It’s been suggested that I buy a program to help me manage that extra money. The program costs $3,900! What are your thoughts?
I’m a single, stay-at-home mom with a disabled child. My income’s not that great, but God provides! But I’d like to invest in something and see a return but don’t know which way to go.
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