Are Interest-Only Mortgages for Seniors a Good Idea?

I recently helped a senior who was paying over $800 per month on an interest-only loan. She had been interested in a reverse mortgage for some time as her increasing monthly expenses were causing much stress to her. It made sense to evaluate this option for her.

One of the things that she realized is that her $800 payment was literally a throw away. The only thing it was providing for her was the minimal tax benefit at the end of the year. What if she were to have NO payment, and use a portion of the $800 to invest in a low-risk fund, bond, or whatever. (By the way, I am not a financial planner, so I did direct her to a financial professional that could assist her.) By investing in a low-risk investment she not only frees up some cash for her to have some elbow room each month, but she also will provide herself future financial resources.

In working with seniors in this situation as they consider a reverse mortgage, the question is always the same, “What are your plans for your equity?” and “Would you rather use your equity today to give your breathing room to live and pay your bills, or would you rather use it later for someone else?” Healthcare issues are usually a part of that conversation as many seniors would like to keep a portion of their equity for a possible long term care need. Whatever the case, these are the issues that one needs to consider when looking into a reverse mortgage.

So, does paying on an interest only mortgage make sense for a senior? It appears that there may be better options available. Using the reverse mortgage is just one of those very good options!

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