Law Office of Richard M. Russell
Falmouth, Massachusetts
508.457.7557
info@richardmrussell.com

This site does not provide legal advice. Please visit the Law Office of Richard M. Russell for information specific to your circumstances.

Thoughts About Reverse Mortgages

■ once a reverse mortgage is obtained, the property subject to the mortgage must remain the borrower’s principal residence (if not the principal residence, the mortgage must be paid): this provision could limit future planning opportunities

■ if the mortgage provides for a line of credit, the amount available under the line of credit increases with time: this appears to be a favorable feature

■ for so long as the property serves as the borrower’s principal residence, the borrower need not make any payments toward the mortgage (except for up front application costs)--the borrower must continue to pay taxes, insurance, etc.

■ up front application costs are substantial

■ some lenders may waive the origination fee

■ in any mortgage-loan transaction, interest is charged against borrowed money; in a reverse mortgage, the interest (and the original loan amount) need not be paid while the mortgaged property is the borrower’s principal residence; unpaid interest is added to the loan amount and itself is subject to interest; the failure to pay interest during the life of the loan results in a rather substantial increase in indebtedness beyond the amount originally borrowed

■ a reverse mortgage may be used for purchase of a house: those downsizing, for example, might be able to take advantage of this provision

■ reverse mortgage counseling is required and is valid only for 180 days; additional counseling will be required if a loan is sought after the 180 days

■ the transaction is subject to a three-day right of rescission