 | Robert Cobb is Managing Broker/Owner of CENTURY 21 Cobb Realty in Pittsburg, KS. He is a life-long resident of Pittsburg and a PSU graduate with a BS in Business Administration. He has been in the real estate field for 23 years. He is currently a KAR Director and the President of the Pittsburg Board of Realtors. |
Real Estate
2011-10-20 12:16:24
What is a reverse mortgage? - series - part 2
A: Last month, we explained a reverse mortgage and who is eligible. This month, we will touch on the benefits and discuss some of the considerations.
To recap what we discussed last month, a reverse mortgage is a loan for senior homeowners that use a portion of the home’s equity as collateral.
As the country weathers what is the worst financial crisis since the Great Depression, seniors are among the most financially vulnerable population. Many seniors live on a small fixed income and face a staggering increase in cost of living expenses. For this reason, leveraging the availability of a reverse mortgage can be a huge advantage under the right circumstances.
However, a reverse mortgage should be considered a loan of last resort and should be considered only after careful research. It is easy to fall prey to misleading advertising that fail to fully explain that the money is a loan or suggest that you can never loose your home.
There are some risks you should consider before proceeding. While a reverse mortgage relieves a borrower of monthly mortgage bills, the borrower is still responsible for other costs such as property taxes and insurance— and failure to do so can result in foreclosure. They are also responsible for maintaining the property, including the landscaping, or risk the loss of the property.
Since the home is often the main or only asset, borrowers also should keep in mind that the more cash they take out and the longer they go without making loan payments, the interest charges and other costs can use up much or all of the equity, leaving fewer and fewer assets for the borrower or heirs. And if you want to keep the house instead of selling it or give it to your heirs, the full loan amount would be due and payable from your own funds, even if its more than the value of the property.
The bottom line on reverse mortgage: While they can be helpful, exhaust all of your other resources first and pursue only after counsel from a financial advisor.
