Beware of advisor shilling 'lump-sum' reverse mortgage
Miami Herald, August 27th, 2006
Q: I began getting Social Security last February. This
year I lost my job. A financial advisor suggests I take a reverse
mortgage ''lump sum'' and invest it to supplement my Social Security
income. I have no other income and no heirs. My home is worth about
$400,000 with a $77,000 mortgage at 4.25 percent interest, which
adjusts by 2 percent next year. I love my home and want to stay here as
long as possible. Do you think a reverse mortgage will work for me?
A: Yes. But I am very worried that so-called financial
advisor might have suggested you take a reverse mortgage lump sum so he
can sell you an annuity or other investment to earn himself a large
sales commission.
If you want to receive monthly lifetime income from a reverse
mortgage to supplement your Social Security income, you can elect that
choice direct from the reverse mortgage lender. You don't need that
financial advisor to help you.
However, you will need to use $77,000 of your reverse mortgage
entitlement to pay off your current mortgage. Then you won't have any
more monthly mortgage payments. The balance of your reverse mortgage
can be taken as lifetime monthly income, a credit line (except in
Texas), lump sum or any combination.
Read more of this article. Learn more about Reverse Mortgages.