fi nancialforum Reverse Mortgage A
Is It Worth It? To get an estimate of the benefits you might receive from a reverse mortgage, visit www
.reversemortgage.org and look for the Reverse Mortgage Calculator.
PHOTO: SEAN SHANAHAN
Learn the pros and cons of a reverse mortgage to help you determine whether one is right for your situation and goals. Phil Dyer, CFP, discusses some of the basics.
A reverse mortgage can be a very useful fi nancial tool — if used in the right circum- stances. Unfortunately, there is a signifi cant amount of misinformation about reverse mortgages, all amplifi ed by the huge amount of information available on the In- ternet — a Google search for “reverse mort- gage” yields more than 2 million results. Consider the following questions before making a decision on a reverse mortgage: Do you understand how reverse mortgag-
es work?Having a solid understanding of how reverse mortgages work is necessary to make an informed decision. To obtain a reverse mortgage, homeowners must be age 62 or older, occupy their own home, and have enough equity to make the re- verse mortgage possible. Any liens in place, such as primary mortgages or home-equity lines of credit, must be paid off with the reverse mortgage proceeds fi rst. Then any remaining amount can be taken as a lump sum, as monthly payments, as a credit line that can be drawn on as needed, or as some combination of all three. The homeowner still owns the home
and is required to keep the property in good repair and pay property taxes and insurance. The reverse mortgage must be paid off (including the initial principal amount, any additional draws on remain- ing equity, and accumulated interest) if the homeowner moves out of or sells the prop- erty. The total amount available is based on a combination of the borrower’s age, the value of the home, the total of mortgages or
other liens, and the specifi c reverse mort- gage program chosen. Finally, all those ap- plying for reverse mortgages are required to meet with a HUD-approved reverse mortgage counselor to ensure they fully understand the pros and cons. What are the costs? The biggest sur- prise for many exploring reverse mort- gages is the steep upfront costs, including origination fees of up to 2 percent, HUD- insurance fees of 2 percent on the most popular Home-Equity Conversion Mort- gage (HECM), and a variety of other fees. Fees of $12,000 to $18,000 are common, although these fi gures are decreasing as the market gets more competitive. (HUD approved the HECM Saver program in October 2010, which drastically lowers the insurance premium but also lowers the loan amount available.) What’s your goal? Do you want to maxi-
mize how much you pass to your children? A reverse mortgage might not be the best option, because the principal and interest that eventually must be repaid could eat up most of your home equity. However, if you don’t have direct heirs or you need ad- ditional money to live comfortably during retirement, a reverse mortgage might be worth exploring.
MO
— Former Army Capt. Phil Dyer, CFP®, is deputy director, Benefi ts Information and Finan- cial Education. To speak with a fi nancial plan- ner, contact USAA at (877) 913-6622 or www
.usaa.com/moaa, or visit
www.moaa.org/fi nan cialcenter for other resources.
MARCH 2011 MILITARY OFFICER 49
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132