By Chris Poole, Housing Coordinator, Certified Home Equity Conversion Counselor
For seniors, 62 and over, who are house rich and cash poor, a reverse mortgage may sound like a dream come true. You may have seen the TV ads.
“A government insured reverse mortgage can help you and your family now…get tax free cash,” says actor, politician, and paid spokesman Fred Thompson.
Another reverse mortgage pitchman, Henry Winkler, AKA “The Fonz,” says, “Enjoy retirement your way!”
But is a reverse mortgage right for you? There is a lot to consider, including the cost of the loan, potential affect on your heirs, and occupancy requirements.
An FHA backed reverse mortgage is called a Home Equity Conversion Mortgage, or HECM for short. Closing costs and related up-front costs can reach $10,000 or more. It is true that these costs are rolled into the loan, so you may not have to pay these items out-of-pocket. But those costs will come out of your home’s equity. So you do pay for it.
No payments are required with a reverse mortgage, but interest and other fees can continue to accumulate for the life of the loan, meaning the loan balance will continue to increase, eating away your equity.
For many seniors, a reverse mortgage is a terrific option. For others, it may not be the best choice. CCCS of Central Oklahoma serves as a neutral third party put in place to protect your interests. While there are many well-meaning lenders, we all know that every industry contains charlatans and CCCS is part of the process that helps protect homeowners from predatory practices. CCCS provides people interested in a HECM with all the pros and cons of a HECM, so an informed decision can be made.
You can read more about Reverse Mortgage from the Federal Trade Commission
and you can search the HUD Roster for a certified counseling agency near you.
