Tina Ashcraft of Olive Branch, MS, wrote to tell me that her disabled parents are fixing up their home to prepare it for sale. She says they have contacted a Tulsa, OK, company about a reverse mortgage after seeing the company's commercial.
"The commercial also says that reverse mortgages are government funded. We have talked to some realtors and mortgage companies here locally and no one knows much about them. Can these people be trusted?"
In a reverse mortgage, you use the equity in your home to make your mortgage payments. Think of it as a home equity loan to pay off your mortgage.
Sam Goff, a loan officer with Evolve Mortgage in Cordova, TN, and the host of the mortgage radio show House Calls on NewsRadio 600 WREC, says a reverse mortgage is a FHA-type of loan. You must be 62 or older to apply, and before a lender can take your application, you must get counseling from a HUD-certified housing counselor (contact the Memphis Housing Counseling Network at http://memphis.earnbenefits.org/mhcn/).
Reverse mortgages can be arranged to:
* Eliminate your mortgage payment
* Get you a lump-sum payment
* Get you a monthly payment of cash you can use to make home improvements, etc.
The downside: HUGE CLOSING COSTS. Goff says where a traditional mortgage may have an average of $2,500 in closing costs, a reverse mortgage will average $10,000 in closing costs.
Goff says a good candidate for a reverse mortgage would be a senior couple in good health who wants to stay in their home for as long as they can. So Ashcraft's parents would not be good candidates for a reverse mortgage because they are trying to sell their home. Goff recommends they seek a home equity loan to finance the repairs if they can qualify for one.