The New York Times reported March 24 on a California homeowner, on the verge of bankruptcy, who is considering a reverse mortgage per the advice of a financial adviser. The article, titled “A Homeowner With No Savings, But Some Options,” outlines the situation of an “ideal candidate” for a reverse mortgage.
The homeowner, Susanna Wilson, has social security income and earnings from two part-time jobs, but not enough to cover all expenses and pay off her credit card debt. She inherited a house valued at $150,000 to $200,000, which she owned free and clear previously, but took a mortgage on in order to pay for repairs several years ago.
Considering filing for bankruptcy, Wilson is seeking advice from a financial adviser, also quoted in the Times article who talks about a reverse mortgage option:
“Before she takes that drastic step [of declaring bankruptcy], Ms. Wilson should consider some other options, said Elizabeth Rutter Baer, a certified financial planner in Lansing, Mich. She worries that Ms. Wilson is ‘extremely close’ to the edge and isn’t getting anywhere with her debt payments because she keeps putting more expenses, like food, on her credit cards,” the Times reported.
“To that end, Ms. Baer recommended something she said she had never before suggested: a reverse mortgage. Such mortgages allow homeowners to tap existing home equity to receive a lump sum or monthly checks. Unlike a home equity loan, however, borrowers don’t have to make any repayments until they no longer live in the home. The strategy can be risky, with high fees and sometimes poor counseling for borrowers. Reverse mortgages are available only to homeowners 62 or older. ‘Susanna is the ideal candidate,’ Ms. Baer said. ‘This is one instance where it could work.'”
Read the entire New York Times article.
Written by Elizabeth Ecker