Is a reverse mortgage right for you? - CBS42

BIRMINGHAM, Ala. (WIAT) - Have you ever heard of a reverse mortgage?

These government sponsored loans have been around since the 1980's.

Over the last five years, more Alabama seniors on fixed incomes are turning to this option to pay bills and maintain their homes.

You've seen the commercials.  The ones promising a life void of financial hardships simply by having a reverse mortgage, an FHA Loan for seniors 62 and older.

"It's really to help senior homeowners out during a time in their life when they're on a fixed income and have other needs," said Jimbo King of McGowin-King Mortgage, LLC.

King has spent the last decade helping seniors like Christine Wade obtain a reverse mortgage and stay in their home.

"There is a lot of sentiment in this home," Wade said.  "I raised my son here and it has a lot of memories."

Thirty-six years worth of memories she desperately wanted to keep.

A reverse mortgage gives seniors, like Wade, 60-percent or more of their home's value.  If your home is appraised at $100,000 you can get $60,000, payable in cash, a line of credit or monthly payments.

But there is a catch.

"The requirement is that all existing leans or debt against the house be paid off," King pointed out.

That means the house needs to be paid in full.  For Wade, that was the case.  She opted to get a lump sum payment and used the money to pay bills and make necessary home repairs.

"I needed to do some maintenance on my home," she said.  "I needed to do some updates.  I still need to do some things."

But a reverse mortgage isn't for everyone.

"It's not for people that are not going to stay in their home for two or less years," King said.

It's also not for those looking for quick cash.  It takes four to six weeks to get a reverse mortgage.  In Wade's case, it took several months.

Although closing costs are rolled into the loan, applicants are required to pay the appraisal fee.

Finally, if a senior dies or is forced to leave their home for a nursing home the loan is due in full.  You have one year to pay it back.

For Wade, it's been a win-win situation.  After losing her husband of 51 years to lung cancer, she thought the dark clouds would ever go away.  Thanks to a reverse mortgage, her financial worries are gone and her skies are sunny and clear once again.

"I feel comfortable," she said.  "I know now that I don't have to do something drastic."

Before getting a reverse mortgage, do your homework.  It's also advisable to choose a local mortgage company and check with the National Mortgage Lenders Association to ensure the company is legitimate.