Reader comments
Greg Kratz: Reader decides to hold off on reverse mortgage

These reverse mortgage seminars have a real good sales pitch and it all sounds good but you have to read the fine print of the contract to see what is really involved. They have lots of if's, and's, and but's about the property involved and the money you are promised to get.

First there is the amount you get, 80% of equity, then they take 10%-20% of your amount for their 'service' fees. What ever is left they urge you to let 'them' invest for you in the stock market and your monthly net gain is whatever the market pays minus their fees on a monthly payment. If you opt not to invest and don't spend the windfall wisely you end up in the same situation as before.

As for the property, the now resident must pay all the property taxes and fire insurance every year and maintain the home and appliances to contract demands.

The now resident cannot be absent from the property for more than 30 days, which can easily happen in an extensive hospital or recovery center, or long vacation, and can be forced to vacate the home.

Read the contract.

As Shirley states, most of her assest are in her home. That is not a smart thing, especially that we have seen how fast the value of that asset can disappear. Shirley should do the reverse mortgage and lock in most of her equity then leave all the money in the growing line of credit. It has been proven that doing so is better than waiting in terms of money available. Any money left in the credit line does not have any interest accruing against it so her balance owed will be affect until she actually uses that money. Also,interest rates have only one way to go and that will mean less money available to her in the future.

Her balance owed will not increase until she actually uses any money from the credit line. If her home appreciates in value she benefits from that appreciation. If her home goes down in value it doesn't affect her financial position.

Kevin,
Are you a Reverse Mortgage Loan Officer or some other kind of expert? I ask because as I understand the loan it carries some $17,000 in up front loan fees which immediately begin accruing interest... plus the lender charges another $360 per year in 'servicing fees' and HUD tacks on another insurance fee every month - and interest is charged monthly on all of these fees as well - whether or not the Senior ever takes a dime from the credit line; and reverse compounding interest on the $17,000 and all these fees adds up very quickly.

The first comment to this article contains completely inaccurate information.

You don't get 80% of equity. You get from 45 to 65 percent of the value of your home, after all upfront fees.

The lender cannot invest your money. If you chose to you can but there is no investment available that can meet the cash flow that the reverse mortgage provides. If anyone says you must invest in order to do the reverse mortgage call the attorney general of you state.

If you don't use any money you have available to you, like a savings account, wisely you are in for problems. The reverse mortgage isn't the problem, the use of the money can be.

The homeowner is responsible to keep insurance and property taxes current. The home must be maintained to minimal standards. There are no requirements to maintain any non safety or structural aspects.

The loan comes due when you sell, die while living there, or are out of the home for 12 consecutive months.

Kevin,
Seems you have a lot of knowledge but you have not responded to my comments about the true cost; and although your statement is true that the lender cannot attempt to 'invest' your loan proceeds for you this practice was allowed until last year when Congress got involved since many Seniors had invested all their reverse loan proceeds into terrible investments sold to them by their Reverse loan officer, which investments allegedly would make so much money that it would cover all the Reverse Loan costs and make a tidy profit to boot- obviously not true. The Gentleman was accurate.