Mortgage: These seniors chose reverse mortgages

Mike Ryan liked what a reverse mortgage could give him: the ability to take equity out of the house, tax free and with no monthly payments. But he was skeptical, too. He thought about it for two years.

Then, Beth Paterson, executive vice president at Reverse Mortgages SIDAC, a division of Greenleaf Financial, in St. Paul, Minnesota, told Ryan he could sell his current home and use a reverse mortgage to buy a new home.

With that in mind, he was sold.

Reverse mortgage

A home equity loan in which the borrower is not required to make payments. The homeowner must be at least 62 years old. A reverse mortgage accrues interest and does not have to be repaid until the homeowner dies or moves out of the house. The Federal Housing Administration calls it a HECM, for home equity conversion mortgage.

A long climb from the garage

At the time, in mid-2013, Ryan and his wife lived in a home with a tucked-under garage and 15-step staircase to the main level.

"We wanted a single level so my wife didn't have to traverse steps up and down. Every time we went to get groceries, we had to bring them up the 15 steps and vice versa," he said.

New home

The reverse mortgage paid off an existing loan on that home and, combined with the equity from the sale, enabled the Ryans to buy their new residence.

"The old house sold for $240,000," Ryan said, "and that afforded me enough to actually put a few bucks in my pocket at the end of the day."

The Ryans' new home, bought for $400,000 in November 2013, also has two levels, but the main living area is on the first level, just two steps up from the garage. The lower level is a walk-out basement that contains storage space and a guest bedroom.

No worries

The up-front fees and interest costs were "one of the drawbacks," Ryan said, but he adds that he and his wife had no concerns about using their home equity.

"We're the perfect candidates for a reverse mortgage because there's no one for us to be leaving our money to," he said. "The idea is: Why shouldn't I enjoy the fruits of my labor when I was younger in my old age if it makes it a little easier for me? It's the perfect tool."

So far, Ryan said, he has no regrets about the reverse mortgage, although it was difficult to move out of the home where he and his wife had lived 38 years.

read more: http://www.chron.com/news/article/Mortgage-These-seniors-chose-reverse-mortgages-6105516.php