(Consumer Reports) Many people realize that they haven’t saved enough for retirement, and see a reverse mortgage as a possible fix.
Borrowing against the equity in your home for retirement income can be a good idea. But reverse mortgages have a history of problems. And despite recent reforms, they’re still not for everyone.
Consumer Reports tells you how to figure out whether a reverse mortgage is right for you.
Reverse mortgages can be very risky loans. They come with certain conditions and if you don’t meet them, you could potentially lose your home.
A reverse mortgage can also be expensive. So Consumer Reports says ask yourself some tough questions, like:
• What is the total cost, including closing fees and expenses? Is there a better, cheaper option?
• Can you truly afford to live in your home? You’re still responsible for paying property taxes, insurance, and upkeep.
• And finally: Can you stay in your home as you age? Does it have a lot of stairs? Is there a lot of property to maintain? Are you close to good doctors and hospitals? And probably most important, are you near family members who can look out for you if you need help in your older years?
One important change Consumer Reports advocates is that before applying for a reverse mortgage, seniors be required to fill out a worksheet outlining possible consequences.
Consumer Reports helped design such a worksheet, which has recently become mandatory in California, and thinks it should be required everywhere.