Reverse Mortgages & The Motley Fool
August 3rd, 2007
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The Motley Fool — long a source of interesting financial advice — has a brief article regarding reverse mortgages.
Entitled. Secrets of the Unmortgage, author John Rosevear makes three interesting points.
First, the longer you wait, the older you are, the more you can borrow.
This assumes that home equity increases over time, an assumption which is not justified in all geographic areas in the short term.
Second, you have to watch out for fees and charges. Says Rosevear:
“Fees for a reverse mortgage are typically higher than those on a regular mortgage — as much as 12% of the amount borrowed, though competition is expected to drive fees down over time. These fees cover the additional risks assumed by the lender (like if you live longer than expected or your house declines in value). You can usually finance them as part of the loan, but that will reduce the amount you end up borrowing.”
Third, when you die a reverse mortgage must be repaid. If leaving your home to heirs is important it may be that a reverse mortgage is not for you.
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