The Heller School for Social Policy and Management, Brandeis University

National Program on Women & Aging
 

Women & Aging Letter
Excerpt - November 1997

Reverse Mortgages: A Solution to the "House Rich, Cash Poor" Problem?
Volume 2, Number 4
House Rich, Cash Poor?

"House-rich, cash-poor" elderly homeowners often struggle to pay their bills -- even though their houses represent large, but illiquid assets. In contrast to a forward mortgage where homeownders make monthly payments TO a lender -- homeownders with reverse mortgages RECEIVE monthly payments from a lender, borrowed against the value of their home. There are two basic kinds of reverse mortgage loans: (1) term and (2) tenure. Term loans have loan periods of a pre-specified number of years. Tenure loans allow homeowners to stay in their homes until they die or decide to move.

Reverse mortgages can be costly, and deciding whether to take out a reverse mortgage is extremely complicated. It involves making estimations or judgements about many unpredictable future events. Here are some of the questions a homeowner must ask:

     
  • How long will I live?
  • How long can I live independently?
  • How long will I remain healthy?
  • Will future interest rates rise or fall?
  • What will happen to the value of my house?
  • What will be the future needs of my spouse or children?
  • How attached am I to my house?
  • How important is it to leave a bequest?
  • How do I feel about taking on debt?
  • Would I rather spend my equity now or save it for when I might need it more?
  • How important is it for me to remain independent?


Counselors Can Help

Because of the complexity of decision making and the danger of scams, it is advisable for people to seek help from a relaible professional counselor. Finding good advice is not easy. Here are some resources to help:


National Center for Home Equity Conversion
7373 147th Street West #115
Apple Valley, MN 55124
(tel.) 612-953-4474

Request or send for their $1.00 booklet: Preferred Reverse Mortgage Lender & Counselor List Include a stamped, self-addressed business envelope.

AARP Fulfillment
601 East Street NW
Washington, DC 20049
(tel.) 202-434-2277

Free booklet: Home-Made Money
$5.00 video: Reverse Mortgage Choices

Special thanks to Roberta Leviton for providing much of this information.

This is an excerpt only

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