Beware of advisor shilling 'lump-sum' reverse mortgage

Here is another great question and answer article from Bob Russ that cautions about listening to any advisor that pushes lump-sump reverse mortgages for investment purposes:

Q: I began getting Social Security last February. This year I lost my job. A financial advisor suggests I take a reverse mortgage ''lump sum'' and invest it to supplement my Social Security income. I have no other income and no heirs. My home is worth about $400,000 with a $77,000 mortgage at 4.25 percent interest, which adjusts by 2 percent next year. I love my home and want to stay here as long as possible. Do you think a reverse mortgage will work for me?

A: Yes. But I am very worried that so-called financial advisor might have suggested you take a reverse mortgage lump sum so he can sell you an annuity or other investment to earn himself a large sales commission.

If you want to receive monthly lifetime income from a reverse mortgage to supplement your Social Security income, you can elect that choice direct from the reverse mortgage lender. You don't need that financial advisor to help you.

However, you will need to use $77,000 of your reverse mortgage entitlement to pay off your current mortgage. Then you won't have any more monthly mortgage payments. The balance of your reverse mortgage can be taken as lifetime monthly income, a credit line (except in Texas), lump sum or any combination.

Robert J. Bruss is a California lawyer and licensed real estate broker. Leave your questions at www.bobbruss.com