This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

7 Real Answers You Need on Reverse Mortgages

NEW YORK (TheStreet) -- Reverse mortgages are a viable option for retirees who need extra money in their golden years, but is one right for you? Experts weigh in on the top seven questions you should ask before taking out a reverse mortgage.

1. Who are reverse mortgages right for?

If you're 62 or older and the majority of your wealth is tied up in your home, a reverse mortgage may be the right option for you, says Greg McBride, senior financial analyst.

"When you don't have the luxury of having a paycheck come in, the single biggest worry among retirees is whether they have enough money. You're going to need money to see the grandkids, fix up the house and travel. Accessing the equity in your home is a great way to do all that."

Reverse mortgages can give retirees "breathing room" in what may otherwise be a very tight household budget, McBride says. Although many retirees may have had visions of giving their home to their children when they die, the money in the home may be better put to use now.

"I can tell you now as someone who has two retired parents, I don't want their house -- I want them to be comfortable and not worry about money," McBride says.

2. Who are reverse mortgages wrong for?

If the money you'd get from a reverse mortgage still wouldn't be enough to ensure you can pay your bills every month, it's not right for you, says Linda Sands, branch manager for Luxury Mortgage, a mortgage bank in Stamford, Conn.

"If you take out a reverse mortgage and use it to pay off your existing mortgage so you don't have that payment, that's great. But if you still can't pay your monthly utilities or car payment, it just doesn't make sense," she says.

For many retirees, their home is their biggest asset. The reverse mortgage "uses up" that asset, and makes either selling the home or passing the home down to heirs more difficult, if not impossible, says Ben Simiskey, CPA and CEO of PLS Advisory, a wealth management firm in Houston.

"People who need money may think of the reverse mortgage as a panacea, and it's not. It makes sense for some people, but many others have better options or future plans for their home," he says.

There's no one-size-fits-all description for bad reverse-mortgage candidates, so a counseling session from an impartial third party is mandated for anyone considering this type of mortgage.

3. Do I have to take the counseling session?

Yes. The counseling session is mandated, and you'll get a certificate of attendance when you complete the 60- to 90-minute session. The sessions are taught by HUD-approved third-party counselors who don't have ties to a lending institution or broker.

"We are not even allowed to take a full application before a borrower has had a counseling session," Sands says. "During the sessions, the counselor will make sure the person understands the full impact of what a reverse mortgage is and they'll find out if it's going to work for them financially."

Bring one of your children along with you if you think you'll have any doubt as to what the counselor may be saying, Sands says. It can get complicated.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,039.49 +60.36 0.36%
S&P 500 1,992.37 +5.86 0.30%
NASDAQ 4,532.1040 +5.6220 0.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs