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December 1, 2013

Smart Money: Reverse mortgage not for everyone

DEAR BRUCE: I have a friend who will be 62 years old in June 2014. She is seriously considering a reverse mortgage. Are reverse mortgages a good idea? Personally, I don’t trust anything the govern-ment has to offer. — Janie, via email

DEAR JANIE: First, there is nothing wrong with reverse mortgages. Whether or not they are a good thing for your friend is another matter altogether.

It’s important to understand what a reverse mortgage is. Simply put, it is a loan against the equity in the home that does not have to be paid until such time as the owner is no longer in the picture or stops living in the home. The fact that most are guaranteed by the government is not a problem from my prospective.

You say your friend will be 62, which means she will get a relatively modest amount of money. Why? Because she could live in the house 20 or 30 more years.

Generally speaking, I don’t think a reverse mortgage is really smart for everyone. I don’t think it’s wise to consider until a person is in her early to mid-70s.

I would have to know more about your friend to be more helpful.

DEAR BRUCE: My son is unable to pay back his student loans. He attended a community college last year. He is currently looking for a job to start paying on his debt. How should we handle this? Should we contact Sallie Mae and let them know he can’t afford to pay right now? — Reader, via email

DEAR READER: It will depend on whether his debts are private or public. Contact the holder of the loans, at least one of which you mentioned is Sallie Mae. Explain the situation, that your son is unemployed at this time and seeking a job to pay back his debts. I am sure they hear this often.

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