"Get Your Finances Ready"-Staying Put, The Pros & Cons of Reverse Mortgage
PBS, June 23, 2008
SUZANNE PRATT: Many new or soon to be retirees want to stay in their
homes. But they worry they won't have enough money to do so or wonder
what will happen if they face a financial crisis. For some a reverse
mortgage can be a viable option. But it's not for everyone. Tonight, as
we continue our series "Get Your Finances Ready for Retirement," Connie
Hicks looks at the pros and cons of reverse mortgages.
CONNIE HICKS, NIGHTLY BUSINESS REPORT
CORRESPONDENT: If you love your family home, perhaps the last thing you
want to do when you retire is to sell it and move away. But staying put
on a fixed income may not be easy. And if it's a problem, Robin Talbert
of the AARP Foundation says a reverse mortgage is often seen as a
solution.
ROBIN TALBERT, EXEC. DIR., AARP FOUNDATION: Typically people take out
a reverse mortgage because they need the additional income to stay in their
home; they may be what we call house rich but cash poor.
HICKS: A reverse mortgage is a loan taken
against the equity you -- the retired homeowner -- have in the home.
The bank provides you with cash, either monthly or in a lump sum or as
a line of credit that you can draw on as needed. However, you never
have to make a mortgage payment. That's because the loan is usually
paid back from the proceeds of the home sale after you die or move
away. Two years ago, Diana and Peter Nicholson decided to get a reverse
mortgage on their Washington, DC condo. They didn't need the money
immediately, but they wanted a safety net. So they got a $260,000 line
of credit.
DIANA NICHOLSON, RETIREE: It provides us with money in case we have
an accident or a crisis. We don't have to go into our savings.
HICKS: Financial planner Terry Savage thought a reverse mortgage was
such a great idea, she helped her father get one.
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