Earlier this week, MSNBC sat down with TODAY financial editor Jean Chatzky and CNBC’s Carmen Wong Ulrich to discuss investment ideas for retirees. During the segment, a viewer asks about a reverse mortgage for her mother. Below is a copy of the transcript which covers reverse mortgages.
Q: Hi, we’ve been partly funding my mother’s rent in a close-by senior apartment with her dwindling savings while waiting for her home to sell back down south. It isn’t moving in this market and we are not allowed to rent her home. Would it be wise to take a reverse mortgage, equity loan or some other type loan until it sells? — Bonnie, Brighton, N.Y.
Carmen Wong Ulrich: Stay away from reverse mortgages unless you need it as a last resort. Reverse mortgages work by basically taking out the equity in your home — selling back what you own in the home — however, reverse mortgages in particular are packed with fees that can lose you up to 20 percent of your equity. If you’re really feeling hardship, take out a HELOC, home equity line of credit, instead. It can be a tax deduction for her as well and all you pay is the interest and maybe small administration fees. However, HELOC rates are adjustable and rates will go up eventually, so be mindful of that and keep a cushion to protect you from a ballooning monthly bill.
It’s clear from Ulrich’s answer she doesn’t understand reverse mortgages since her mother couldn’t get a reverse mortgage since the home isn’t her primary residence. Not to mention the fact that she thinks reverse mortgage fees can “lose you up to 20 percent of your equity”.
Ulrich’s show on CNBC is actually pretty good, but the fact that she thinks someone who is feeling hardship can qualify for a HELOC means she isn’t talking to many bankers. To view the video click the link below.