Rushville Republican

Columns

December 17, 2013

It's not quite that simple

(Continued)

Now, when does the loan have to be repaid? (Surely, no one was thinking that any lender was going to lend homeowners money based on the equity in their home and not expect to be repaid – with interest!) The loan is due when the borrower sells the house or fails to keep the taxes or insurance current or moves out of the house for more than twelve consecutive months or passes away. When the mortgage becomes due, the borrower or his/her heirs of the estate have the choice of refinancing and keeping the home or selling it and keeping any remaining equity or turning the home over to the lender. Most people who use a reverse mortgage usually have no heirs; and, when the last borrower passes away, the lender takes possession of the house and resells it to recover at least the amount lent to the now-deceased borrower.

So, before considering a reverse mortgage it’s important to keep in mind that, if the homeowners plan to leave anything to their children or other family members, their house isn’t going to be part of the bequest – unless the children or other family members understand that, to keep the house, they will have to repay the amount of the loan, plus interest. This approach might not be bad if the house is worth substantially more than the amount owed as a result of the reverse mortgage. For family members who either plan to sell the house or live in it, paying off the loan might be a relatively inexpensive ways to acquire a home.

Just for the sake of fairness, here are some things to think about if you’re considering a reverse mortgage. Keeping in mind that a reverse mortgage is really a loan, there are going to be loan-related fees, like an origination fee, for example. Other fees are typically higher since the loan isn’t based on income or a credit score. The interest rate on a reverse mortgage is often higher than the rate on, say, a traditional home equity loan. Your heirs might not get the house. Since the borrower isn’t expected to make payments on the loan, the loan is paid off when the home is sold. If, for some reason, the borrower decides to downsize to a smaller house or move into a long-term healthcare facility, the borrower has to start repaying the reverse mortgage to the lender. Finally, the borrower is still responsible for normal homeowner costs such as property taxes, homeowner’s insurance, and regular maintenance on the property.

Text Only
Columns
  • Spying ways to have vacation fun I have a neighbor named John Campbell, and I am suddenly EXTREMELY suspicious of him.It all started with our summer vacation to Maryland. We made several excursions into Washington, D.C. from our “base camp” in Annapolis. In fact, of the five days we

    July 29, 2014

  • I expect them to do nothing Which crisis is at the top of the list this week? Is it the IRS scandal, the VA scandal, the fighting in Gaza, the emergence of ISIS as a deadly power in the Middle East, the intentional shooting down of Malaysia Airlines Flight 17 which killed nearl

    July 29, 2014

  • Word of advice So, what’s the word? Really, what is the word? With over 250,000 words in the English language, you’d think there would be a word for just about everything. Not so. Therefore, I am on a crusade to find a term for some everyday occurrences for which t

    July 29, 2014

  • There's something about Maryland My family unit has just returned from a death march – oops, make that, “vacation” – in Annapolis, Maryland. In spite of constant 96-degree temps (though it dropped as low as 95.7 at night), and the stifling humidity, we had lots of dolgurn fun. Mainl

    July 22, 2014

  • Learning to say goodbye From as far back as I can remember, saying hello has been a part of nearly each day.During my youth, it was used when I met new people my parents introduced me to and was frequently followed by a handshake. I couldn’t count the number of times I used

    July 18, 2014

  • Lessons from the largely forgotten war As we approach the official date on which the First World War started, July 28, 1914, when the first shots were fired by the Austro-Hungarians who invaded Serbia, it’s appropriate to think about the lessons that catastrophic event has taught us one h

    July 15, 2014

  • Please go away My wife is planning our summer vacation, which we will take in the fall. We took our spring vacation this summer. We got behind in 1984 and still haven’t caught up. I don’t have much input into the planning of these trips, but Mary Ellen did assign m

    July 15, 2014

  • Soothing '60's Surf Sounds I’m sitting in my home office enjoying a serenade of rhythmic pulsations emanating from the outside wall. It’s coming from our water spigot. No. 5 son (age 13) and his buddies are using it to fill water balloons. 1,500 water balloons to be exact. 1,5

    July 15, 2014

  • Soccer-stopping Storm a Lousy Treat What a great way to spend a Saturday morning in July: I’m sitting in my car with rain cascading on the roof, lightning skittering all over the sky, and thunder sockin’ it to the atmosphere with such force that I feel a rumbling in my bum.I’m staring

    July 8, 2014

  • Only in America - Top 10 As we move into the glorious months of summer, I thought you might be amused by reading the Top Ten List of what Canadians supposedly think of how things are going in this country. It’s a lot like David Letterman’s “top ten list.”Number 10: Only in A

    July 8, 2014