That said, reverse mortgages are not for everyone, says J. Michael Collins, faculty director for the Center for Financial Security at the University of Wisconsin-Madison.
“Someone who is cash poor and house rich is a good candidate for a reverse mortgage, especially if you’ve racked up some debt and it’s eating away at your ability to meet other expenses,” says Collins, who urges homeowners to avoid tapping their home equity for nonessential expenses like a vacation or new car.
Consumers considering a reverse mortgage — also called Home Equity Conversion Mortgages, HECMs — however, should shop around for the best deal, since fees vary dramatically.
Some lenders charge an origination fee and mortgage insurance premium along with closing costs, which can be substantial.
“The problem with reverse mortgages has always been the fees,” says Collins. “These products are marketed through brokers and lenders who have a huge incentive to push the products on people who may not be a match for them, and they often come with a lot of fees that get buried into the loan.”
Reverse mortgages are sold by both private lenders and the federal government, each offering a variety of payout structures from a one-time lump sum, to a line of credit, to a fixed monthly payment.Page 2 of 6 | Prev Page | Next Page