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What conditions make a reverse mortgage workable?

House at dusk with porch light on. (Photo: Flickr/Paul Sableman)

(Photo: Flickr/Paul Sableman)

What conditions make a reverse mortgage workable?

September 13, 2012

Q: I am a 72-year-old widow with limited income, and I'm considering a reverse mortgage. I bought my home 7 years ago for $206K and put down $100K. I refinanced almost 2 years ago, and the appraisal came in at $160K. I still owe $103K. I'm not sure if a reverse mortgage is the way to go.

A: In your situation, a reverse mortgage is probably just the thing to do. It allows you to use the equity in your home to basically make the payments for you, and you have no liability for any deficiency because it's a non-recourse loan.

This allows you to keep your home without making mortgage payments, and you can utilize your IRA funds for your living expenses. After you die, the lender can sell your home to recoup the outstanding mortgage.

The costs of closing can be a bit high, but they are rolled into the loan. If the value goes up, the excess of the value over the loan is either yours or your heirs' -- the lender only gets paid what it is owed. I would contact a mortgage broker to help with this.

-- Answer from Richard F., attorney and real estate developer on JustAnswer.

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