Dear Edith: I am 70 and my wife is 68. We want to consider a reverse mortgage. Is this a good time (the economy the way it is), or should we wait for better economic times? We know that this mortgage is backed by the federal government, but how stable is our government? -- G.R.
Answer: I don't think I'll tackle your second question. But for the first:
The state of the real estate market shouldn't have much to do with the decision, which depends on your particular situation and needs. At your ages, you do qualify. How much you can borrow depends on the value of your home and your life expectancy.
Your credit rating and income don't matter because you won't be making monthly payments. Instead, you'll receive money, building up a gradual debt with interest against your home. You can receive a lump sum, a line of credit or a check every month. You don't make repayments as long as you live in the house. You remain the owners, and the money you receive isn't taxable because it's a loan.
When you move out or die, the debt must be repaid, usually by the sale of the property. With the type of reverse mortgage that's backed by the Department of Housing and Urban Development, if the sale doesn't bring enough to pay the debt, the difference is covered by FHA insurance.
Like any mortgage, this one involves upfront closing costs, but you don't pay them now. They become the first part of your mortgage debt. Other than that, the main drawback is that you would have less money to leave your heirs.
You can find information at the AARP's website.
Avoid those lenders who advertise "no monthly payments ever" without mentioning that the loan must repaid some day. Advertising half-truths make me nervous.
WORRIED ABOUT PROBATE
Dear Edith: How can I leave my home to my daughter to avoid probate costs? Is there some type of trust? I have no other assets except this house, amounting to its present tax rate worth of $227,000. -- M.A.W.
Answer: A trust would probably represent needless complication and costs for you. With a simple estate, probate is relatively straight-forward and inexpensive, nothing to be dreaded.
By all means, consult a lawyer about drawing up a will. That should do it. If you are married, your attorney can explain how that might affect your estate.
HOUSE WAS DUMPY
Miss Lank: In 2008, we lost our home to foreclosure. My wife is still working with a good job and I am semi-retired in good health.
Now we have another home. The owner wrote out a skimpy lease agreement -- he will carry us for five years on a lease option to buy, while we try to get a loan. He said the money we use to upgrade the house will be our down payment.