Reverse Mortgage - NOT a Loan of Last Resort

6/18/2009

posted by N. Sioris

Stumble It!

Despite the fact that the media continue to refer to a reverse mortgage as a "loan of last resort" reverse mortgages are still in high demand. It is unfortunate that some so called advisers or financial experts still do not have a comprehensive understanding of how much of a life saving tool a reverse mortgage can be for many senior homeowners.

It certainly can be argued that a reverse mortgage is an expensive option on its' face. However, how expensive is it actually, if you have no other way to supplement your retirement income? I always say, "It is expensive if you don't need the money, but it is NOT expensive if you do need the money." Think about it. If you have no ability to income qualify for a loan or mortgage that requires repayment on a monthly basis, and you do not have good credit or a high credit score, how is it that you are going to be able to access your home equity in any traditional fashion?

Some will argue that you can always get a HELOC - Home Equity Line of Credit without having to prove your income. Well, that was possibly the case a year or two ago, but not now. Even people with stellar credit histories and high credit scores are seeing their home equity lines of credit frozen and or closed arbitrarily and without notice. Underwriting standards for new home equity loans today are very strict and require full documentation of income, credit, and assets. How many retirees can pass this type of credit scrutiny?


You Could Sell Your Home To Get The Cash

Of course, you could sell your house. Then you would have the cash from the sale. But at what price in today's declining market? Is that going to really be the answer to your money problems? More than likely, not. After all, if you sell your home and get some cash from the sale, you still have to live somewhere, right? And how much will that cost? How long will the sale proceeds actually last?

So, pleeeease...........stop listening to the same old tired saw: "A Loan of Last Resort." I find it pretty ironic that all of these talking heads never offer up an alternative solution, after they throw the baby out with the bath water. These two clips are representative of the typical incomplete, half-truth reporting being done at a time of serious financial difficulty for almost every American citizen, young and old. Shame on them!



Watch CBS Videos Online

Visit msnbc.com for Breaking News, World News, and News about the Economy