DEAR SUN SPOTS: I’m sure we’ve all seen the commercials on television concerning people 62 or older who own a home and encouraging them to sign up for a reverse mortgage.

Celebrities who are paid for promoting this program could actually give a better explanation of this process to someone who might consider doing this.

Sure, you still own your own home, until they’ve paid you what its worth, but what happens after that?

I’m sure Sun Spots’ readers would appreciate the real story before enrolling in such a program. Whatever you come up with, I’m sure readers will appreciate the truth.

Also, I have a 32-inch TV (not a flat screen) that I’d like to donate to anyone who might be interested. You’ll need a new remote, as the one I have is already programmed to my TV box. Remotes are available that will work on any TV.

If interested, call 782-9842 and leave a message and phone number so I can return your call. — No Name, Lewiston

ANSWER: One of the best sources for information on reverse mortgages is AARP. Because these loans are sold primarily to seniors, the topic frequently appears in the AARP magazine and bulletin.

The same articles are also on their websites. You can go to aarp.org and search for “reverse mortgage” and read many of them, such as “10 things you should know about a reverse mortgage” at http://tinyurl.com/3bfyxjw.

A reverse mortgage is available only to those age 62 or older. You must own your home outright or be able to pay off the balance with the proceeds of the loan. You maintain title to your home and must continue to pay taxes and carry homeowner’s insurance. You also must live in the home (for example, you can’t rent it out).

You can receive the proceeds in a lump sum, in monthly installments or through a line of credit. When you die, sell the home or permanently relocate you must pay the loan back. Your loan can also be “called” if you fail to maintain the home or pay taxes.

The primary criticism of reverse mortgages is that they are too expensive. Along with the typical costs of a mortgage, there are additional orgination and ongoing fees. 

Also, many people don’t understand all the ramifications of the loan when they sign up. A recent AARP Bulletin had a story about widows and widowers who have been left homeless because they were not named on the loan (http://tinyurl.com/m6lhc4m). When their spouses died, the home was sold out from under them. 

There are times when reverse mortgages are a good fit. Year ago Sun Spots recommended one to a relative in his 80s whose Maine home had appraised high but was not selling. His much-younger wife nixed the idea, and they continued to cash out securities — on which they had to pay capital gains taxes — to cover their expenses, and he worried incessantly about money.

Years later he’s gone and she still owns the home, which Sun Spots smugly predicts will eventually sell for well below its original appraised value.

If they had taken the lump sum, his widow would have the remaining money and the bank could have been stuck trying to sell the house!

This case, however, was rather unusual, which is really the key. There are many financial instruments available, but few are appropriate for everyone. If you are thinking about a reverse mortgage, you should read everything you can find. (Another good source is the Federal Trade Commission, ftc.org.)

And, before you sign the papers, spend a few bucks and have your lawyer make sure that the paperwork is properly done and that you understand it thoroughly.

DEAR SUN SPOTS: There is a new study that proves volunteering is healthy for you. It lowers stress, is a way to learn something new and meet new people.

There are many local opportunities, including serving as a SeniorsPlus dining site volunteer in Lewiston, delivering meals and providing office support.

If you have a passion for seniors and want to know more, please email or call me. If you want to see what other opportunities are available, please visit volunteermaine.org. — Heather Chandel, hchandel@seniorsplus.org, 513-3710

This column is for you, our readers. It is for your questions and comments. There are only two rules: You must write to the column and sign your name (we won’t use it if you ask us not to). Please include your phone number. Letters will not be returned or answered by mail, and telephone calls will not be accepted. Your letters will appear as quickly as space allows. Address them to Sun Spots, P.O. Box 4400, Lewiston, ME 04243-4400. Inquiries can also be emailed to sunspots@sunjournal.com.

Copy the Story Link