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Can a reverse mortgage be a good idea?

March 15, 2019
By ERIC FEICHTHALER - Real Estate Law , Cape Coral Daily Breeze

Dear Mr. Feichthaler:

I am a widow and my income, which is Social Security and a small pension, is just short of my monthly expenses. I own my home with no mortgage, and I have a Certificate of Deposit with a good balance. Some friends of mine have recommended a reverse mortgage, which I understand can pay me a monthly amount from the bank. That sounds a lot better than the opposite where I borrow money and then pay the bank every month! Should I do it?

- Danielle

Dear Danielle:

Like many financial decisions, your direction will be determined by your preferences. My personal preference is to not borrow money. Because of this, I would use the funds (as sparingly as possible) from your CD or savings to supplement your income monthly. While many people view their cash and cash equivalents as their "rainy day" fund, I look at your homestead property as the ultimate store of value. In Florida, your homestead is protected from virtually all creditors the same cannot be said for CDs and cash accounts. Personally, I would first use funds you have in cash accounts, down to a certain level. You do want to keep some money available for the unforeseen.

Remember, the payment of dollars to you through a reverse mortgage really isn't "income," it is simply transferring a small portion of your home value to you every month, which will eventually be paid back to the bank with interest. Normally this repayment occurs after the homeowner's passing. If you do determine that receiving a check every month against the value of your home is best, you will want to speak with several reverse mortgage lenders to determine the best value. Many reverse mortgage companies charge a wide array of fees, including monthly maintenance fees, withdrawal fees and interest rates can vary widely.

I would recommend you have a trusted family member or attorney assist you if you decide to obtain a reverse mortgage. With the dollar amounts involved, caution should be exercised.

Eric P. Feichthaler has lived in Cape Coral for over 30 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Historical Museum, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 17 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.



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