December 5, 2016 - 12:44 am
Q: I’m curious about reverse mortgages. What’s the good of them? I’ve heard they are scams. Can you explain? — M.V.
A: First off, don’t worry about the scam problem. When reverse mortgages first became available, some were extremely expensive. In addition, some older homeowners had their loans linked to inappropriate investments. All that’s been cleared away now.
A reverse mortgage is a true mortgage just as you understand one. You borrow against the value of your home, pledging the property as security. You remain the owner.
The main difference is that you don’t make any repayments. Instead, you can receive monthly checks. In fact, the older you are the larger those monthly payments can be.
Or you can choose to take a lump sum, perhaps to pay off an existing mortgage. The debt keeps growing, with unpaid interest added, as well as — for the most popular plan — Federal Housing Administration insurance premiums.
Not all seniors need this type of plan, but a reverse mortgage can allow some people to remain in a home they might otherwise have to sell. It can even help with downsizing to a different home. As the borrowers won’t be making repayments, credit and income don’t matter. They just have to show they can handle property taxes and homeowners insurance premiums.
No repayment is due until the homeowner moves away or dies. A surviving spouse, even one under the qualifying age of 62, can remain in the home and continue the plan if desired.
Eventually, the homeowner’s heirs can choose to pay off the accumulated loan and keep the house or simply sell the property. If the debt has become so high the sale wouldn’t bring enough to pay it off, that FHA insurance will cover the shortfall.
So where’s the catch?
Less for your kids to inherit. Like many financial strategies, this one is just right for some people and totally wrong for others.
Q: I enjoy your weekly column. I looked on your website but did not see anything concerning our problem.
Our abstract was held by an abstract company that I believe went out of business in 2012. We were told that the landlord locked the company out for failure to pay the rent and that no one can get access to the abstracts that are still inside.
I was told the company got some abstracts out before it was locked up, but mine was not one of them. Are you familiar with this problem, and do we have any chance of getting our abstract out? It would be much less expensive to update the abstract than it would be to re-create it.
We may be moving some time in the next few years, and I would really love to get our abstract. — S. MacN.
A: An abstract — the legal history of real estate — can be fascinating reading, especially if it goes way back. It traces ownership of your land from one owner to the next, naming names and quoting deeds, wills and other documents in the county’s public records office along the way.
And yes, the history contained in your abstract helps prove your unchallenged ownership when you’re ready to sell.
If you had your old one, you could pay a researcher to re-date it, bringing it up to date with whatever has happened, legally speaking, since you bought your home.
As you don’t have it, the only good news I have is that there’s a legal agreement where you live that only the past 40 years really matters.
I double-checked with a lawyer, who said, “I agree. The search in that area goes back only 40 years, so in your reader’s case, if they have lived in their present home for over 40 years, creating a new abstract would be no more expensive than re-dating the existing one.”
Q: I recently paid off our 3.75 percent mortgage. I had the money to pay it off, and I think interest payments are lost money. My wife and I are both 80. If I die first, I don’t want her to have to balance a bunch of monthly payments.
Moving into a smaller house might not be the best idea. Wherever you are, you have friends, neighbors, a church, etc. In a new location, those things would be different or not readily available. Those things take years to establish. And you might end up being lonely. We’re in a nice neighborhood, small town. — R.F.
A: Thanks for writing.
Contact Edith Lank at www.askedith.com, at email@example.com or at 240 Hemingway Dr., Rochester, NY 14620.