Checking The Pulse Of The Kansas City Real Estate Market

There’s nothing quite like meeting potential clients on the golf course. I hate to have to work so many hours a week, but somebody has got to do it. Truth is, I rarely have time to get out and play but when I do it’s a pleasure speaking with others about real estate while doing something so enjoyable. I was playing one of my old favorite golf courses – St. Andrews in Overland Park – and a guy in the foursome asked me my opinion of reverse mortgages. He was very curious and was seriously considering getting one. I told him he may want to check into doing a cash out refinance instead and just pull a lump sum out of his equity to live on and/or invest short-term elsewhere… or possibly even downsizing to reduce costs of  living.

Let’s start from the beginning with Reverse mortgages… These types of mortgages only work if you have equity in your home. In fact you must own the home 100% free and clear to even consider it an option. So, let’s say you have your paid off and you are at least 62 years old. You’ve used up all your savings but you have a $300,000 home paid off. You decide to borrow against the equity in your home to continue living the lifestyle you choose… and there you have the makings of a reverse mortgage.

Important aspects of a reverse mortgage include the loan not having to be repaid (monthly or lump sum) until death or upon the borrower moving out of the home. At that point the loan must be paid off one way or another. Though the interest carry on the loan is obviously building over time. No one I know who has considered a reverse mortgage has gone through with getting one. There’s a reason folks.

It’s the loan costs that most homeowners cite as the reason for avoiding reverse mortgages. They can be expensive and can mean you may be better off doing a straight cash-out refinance on your home or consider downsizing instead. Reverse mortgages could begin to make more sense if the loan costs associated with them were lower.

Posted by Jason A. Brown