Reverse mortgage can be a fine pick

Bruce Williams
The Cincinnati Post

DEAR BRUCE: I am an active realtor at 78. My wife is a part-time secretary at the age of 74. We own our home free-and-clear that has a current market value between $200,000 and $225,000. The local real estate market has been appreciating 5 percent a year for quite a few years. In the past 12 months, the appreciation has been about 15 percent and I would not be surprised if it continued at an annual rate of 10 percent to 15 percent. I have been investigating the idea of obtaining a reverse mortgage, as we would like to be a little more independent since our total income depends completely on our working income and Social Security. We have no retirement or pension plans. Everything I have learned so far about reverse mortgages seems to be positive, but I am certain that there has to be a caveat or two to these programs. Would you elaborate for me? - W.B. Roseburg, Ore.

DEAR W.B.: Reverse mortgages have a place in many people's financial futures. The older one is, the better deal it is and the reason for that is simply, the older you are the shorter your life expectancy. The lender is prepared to advance you more money knowing they will get theirs after your demise. The only advantage of the appreciation will likely come for your heirs, not for you, since you have mortgaged the house and it will not be sold until your death. You should know there is nothing to prevent a reverse mortgage from being paid off simply by selling the house. In other words it's not necessary to continue to draw it down. Even after it's completely drawn down, it isn't necessary to remain in the house forever. It can be sold, the mortgage company will be paid and you will receive the residual. On balance, as long as you understand these details, a reverse mortgage may very well be in your interest. You should understand that as long as you stay in the home and pay the taxes, even though you've exhausted whatever equity could be borrowed against, you cannot be required to leave the house. You are granted life rights.

DEAR BRUCE: My wife and I have a number of credit cards that have been collected over the years. Now we primarily use only two of them. What would happen to our credit rating if we suddenly cancelled all of the others, which range from 1 to 10 years of association? I've heard that if you cancel the card before its second year that this is worse for your credit rating than keeping it. Is there a guideline? - G.W., via e-mail

DEAR G.W.: As long as you're not paying any type of fee for the cards and you're not looking for credit elsewhere, what's the difference? The only danger in keeping them is if you do apply for credit, they're liable to determine that you have too much credit available and deny you. I don't know of any reason why you would be penalized for canceling them. I'm wondering why you have so many to begin with. Keep them or cancel them as long as there is no cost to you; I don't think it matters.

DEAR BRUCE: We have our retirement in place and some minimal investments in mutual funds. I would like to have a certain amount of money directly deposited from my paycheck into a savings account each pay period. Is there any account available that would gain interest, has no fee for a withdrawal and doesn't require a minimum balance? - Reader, via e-mail

DEAR READER: Sometimes looking for the easiest possible way is not the smartest thing to do. If you are having it deposited directly into some account that you're not riding herd on, and if a payment is missed, how are you going to know? Would it be too much trouble to have the money directly deposited into your checking account? Your statement would show the deposit each month and you could write a check for whatever savings vehicle you choose. It doesn't seem to me that this would be an over-burdensome chore for you, and it would be worth the effort.