Transcripts

"Money File" -Getting Money Out of Your Mortgage

SUSIE GHARIB: Well, many people have been refinancing their mortgages recently to get extra cash. But that's not the only way to get money from your mortgage. In the "Money File" tonight, here's Harriet Johnson Brackey, personal finance columnist for "The Miami Herald."

HARRIET JOHNSON BRACKEY, PERSONAL FIN. COLUMNIST, "THE MIAMI HERALD": And you thought the mortgage boom was over, because interest rates have risen. Not so in one interesting segment: reverse mortgages. These are loans that people age 62 and older can use to tap the equity they've built up in their homes, and what a buildup. In the last five years, the average house has increased 38 percent in value. In hot markets, the figure's more than twice that. If you've owned your house since 1980, it could easily be worth three times what you paid for it. So it makes sense that the number of new reverse mortgages is setting a record. Most of these loans are federally-insured. They only have to be repaid when the borrower dies or moves out. What happens if somehow your home's value falls below the mortgage amount? Nothing. The house is sold and insurance covers the loss. If the house's value rises, the loan is repaid and anything extra goes to the borrower or his estate. The negatives? Well, a reverse mortgage is an adjustable loan, so it will become more expensive if interest rates continue to go up. Having one of these loans might affect whether you can qualify for some kinds of federal aid, and the borrower has to pay the cost of insuring the loan, that can be expensive. But if your local real estate market is hot, you might think about this option. You can stay put and put cash in your pocket at the same time. I'm Harriet Johnson Brackey.