submitted by Bucks County Consumer Protection Agency
Q. I’m getting up in years and I’m alone since my husband died six years ago. I’m starting to panic because I’m running out of money to spend on food, prescriptions and anything else that I may need to live.
I was told about reverse mortgages and was wondering if that was the way for me to go. Can you tell me a little bit about reverse mortgages? G.B., Quakertown.
A. Reverse mortgages can help homeowners who are house rich, but cash poor remain in their homes and still meet their financial obligations. To qualify for a reverse mortgage, you must be at least 62 and have paid off all or most of your home mortgage.
The amount you can borrow depends on your age, the equity in your home, the value of your home, and the interest rate. But, in some cases reverse mortgages can end up being more costly than traditional loans because they are rising debt loans. The interest is added to the principal loan balance each month, so the total amount of interest owed increases significantly with time as the interest compounds.
Also, reverse mortgages use up all or some of the equity in your home, which leaves fewer assets for you and your heirs.
Lenders generally charge origination fees and closing costs and some may charge for their services. Because you still retain the title to your home you would still be responsible for taxes, insurance, fuel, maintenance, and other household expenses.
Consumers need to be aware that there are some unscrupulous lenders out there.
It would be worth your while to get advice from some non-profit organizations that can council consumers on reverse mortgages. Contact Bucks County Consumer Protection at 1-800-942-2669 for more information or to request a brochure on Reverse Mortgages.
