In 1978, James Garner won the People’s Choice Award for Favorite Male TV Performer. More recently, you may have seen him in a new TV role — as spokesman for Financial Freedom, a lender that offers reverse mortgages.
Reverse mortgages can offer a financial boost for older homeowners who are house-rich but cash-poor. These loans let seniors who are at least 62 draw on a portion of their home equity while living in their home. When they die or move out, they or their heirs repay the amount, plus the accrued interest, with the money from the sale of the house. If the house sells for less than the amount owed, the lender eats the difference.
To get a reverse mortgage, the house must be your primary residence, and the mortgage must be either paid off or minimal. There’s no income or credit test. The older you are and the higher your home value (up to the maximum federal loan limit), the more equity you can pull out. Congress raised the reverse-mortgage loan limit to $625,500 through the end of 2009. After that, it reverts to $417,000, unless lawmakers intervene.
Fees, closing costs and insurance on reverse mortgages can add up to as much as 10 percent of the loan amount, making them a costly deal, so they’re best if you plan to stay put for a while. Before you go this route, consider taking out a home-equity line of credit or downsizing to a less expensive residence. (Thanks to a new rule, you can use a reverse mortgage to buy a new home. For more details, see “Reverse Mortgages to the Rescue” at kiplinger.com/links/reversemortgages.)
At a time when retirement savers are vexed by the vagaries of the stock market and the economy, commercials featuring the star of “Maverick” and “The Rockford Files” that promise to turn equity into tax-free money sound pretty good. Financial Freedom is up front about the need to explore other options before taking out a reverse mortgage. And it steers clear of troubling marketing claims spotted elsewhere: that reverse mortgages are a government benefit (they’re not) or that you can never lose your home (you can if you don’t pay taxes and insurance).
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