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Sep 21, 2009 6:25 pm US/Eastern
4 Your Money: Are Reverse Mortgages The Answer?
MIAMI (CBS4) ―
Myrtle Robinson is worried about paying her bills and staying in her Richmond Heights home. To take care of her bills, she recently took out a reverse mortgage. However, it turns out it may not be the right answer for her family.
The reverse mortgage gives her a monthly income from the long-term equity in her home which she built up over the years.
Robinson explained, "When I learned about all it had to offer, I thought, 'this is for me'".
But while reverse mortgages allow elderly homeowners to draw the equity out of their home for daily living expenses, they also limit what a family does with the property after the original owner is out of the house.
If all the equity is pulled out, heirs may be left with the unpleasant problem of having to refinance the property themselves, sell it off, or let the bank take it over.
Financial Advisor Charles Sachs of Coral Gables Evensky & Katz warned, "There's a good chance the kids or the family will not have any value left in the home's equity; but the plus side is you're consuming the resources to extend living there."
Federal Officials recently posted
a nationwide warning about reverse mortgages. In some cases, elderly homeowners were charged hefty fees for appraisals and applications. In other cases, mortgage lenders sold elderly clients investments they may not live long enough to make any money on.
Despite the potential problems, Myrtle Robinson says her reverse mortgage is working out well for her and added "It's like a load off my shoulders and after hearing about it, you're grateful."
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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