Reverse Mortgage Guide

Question: Where can I obtain a reverse mortgage that won’t take everything I have worked for with my children having to pay the $17,000 and more in closing costs when I die.

I have a home worth $3,000,000 and only want a $200,000 loan to pay legal fees on trying to recover funds taken from my late husband’s businesses and law practice. I do not want to encumber needlessly the only asset I still hold. Is there ANY plan that doesn’t have this huge fee tacked on or should I just take my loss of $7,000,000 and at least protect my childrens’ and grandchildrens’ inheritance, as little as it may be?

I cannot get any attorney to handle my problems on a contingent basis. Lenders all want “costs” up-front and I don’t have the means to do this. Where might I turn for help? I will be 82 in February, have extremely high blood pressure and would like to die knowing I have not let my children down.

Answer: First, you have a $3 million asset. Do you have any other income or assets that could be used to pay legal fees? Could the legal fees be paid over time?

Second, different lenders have different costs for reverse mortgages. You need to shop around. Most probably much of your cost is in the form of insurance.

Imagine going to an ATM machine. There is a $3 charge whether you take out $50 or $200. It is a better to take out the larger sum — but only if you need it. Given the value of your property, perhaps it would make sense to get a larger loan and give money now to your children. See a tax professional for specifics before doing so.

You will not have a $7 million cost for a $200,000 loan unless you live for an astonishingly long life. What will happen with a reverse mortgage is that you can borrow $200,000 at, say, 7 percent. At the end of year one you will owe roughly $214,000, at the end of year two, $229,000, etc. Upon your passing or when you leave the property, the lender will get the money due from the loan and the balance of the value in the property will then go to your estate.

Lastly, you do not have sufficient information to obtain a reverse mortgage. Take two steps: First, speak with lenders and compare costs and programs. Second, get the services of an attorney who specializes in elder law. Your local bar association should have a list of such specialists. Have the attorney review all reverse mortgage options before you sign anything and, also, make sure you have an updated will and living will.

This entry was posted on Thursday, December 13th, 2007 at 3:43 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.