FIRST, a word about Mr. George Scott, MP. What a man he is. When I think of what he has done for Bermuda, I cannot find the right words. And how correct he is about people in other countries respecting their politicians. No one in North Korea or Myanmar, for example, ever insults parliamentarians in those countries. A vote of thanks to Mr. Scott for showing the rest of us how important good behaviour is.

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LAST week’s inflammatory column on reverse mortgages produced a bumper e-mailbag. Too many issues were raised to be answered in a single column. If I don’t get to your e-mail immediately, have a little patience, please.The column addressed three separate points relating to mortgages. One, the availability and mechanics of reverse mortgages. Two, the availability and desirability of 100 percent mortgages. And three, inadvertently, the relationship between parents and their children, where money is concerned.

On the last subject, just one comment was received, from a friend. “You might want to advise people to read King Lear”, she said. The play is a study of the stresses and consequences that accompany inheritance. It is a historical fact, however, that after writing King Lear, Shakespeare did not receive a single e-mail, so how good could he have been? I will now correct my errors on the nature of reverse mortgages.

It seems that I did not correctly grasp how a reverse mortgage works. What I described was the classic “second mortgage”, and that was wrong. The reverse mortgage product works more like an annuity. I apologise for misleading you.

I trade in common sense and time-tested wisdom, and the mechanics of the reverse mortgage seem to require little of either. My correspondence and subsequent research indicate that a reverse mortgage can work in a number of ways, of which the following is the most common.

Homeowners, such as Harry and Sally in last week’s example, who are above a certain age (which seems to vary, but is usually not less than 62) can take out a reverse mortgage, which is a loan, on a house they own outright, with no other loan outstanding on it. If Harry and Sally (or just one of them; you don’t have to be married) owe money on the house, it must be paid off from other sources before a reverse mortgage can be taken out.

The homeowners retain title to the house until they die, or until the house is sold. They also remain responsible for the payment of property taxes, insurance, utilities, home maintenance, and other expenses — just as they would with a standard first mortgage.

Let us say that Harry and Sally are “land rich and cash poor”. That is, they own a house that’s fully paid for, but have few other resources. A reverse mortgage is a means of realising some of the value of their home without having to sell or vacate it.

Taking out a reverse mortgage means receiving a lump sum, or monthly payments, from the bank that issues the reverse mortgage. There are no repayments to make to the bank, which takes a charge on the house, a legal term meaning that it registers its interest. After all, banks don’t lend you money without a legal means of getting it back, and in this case what the bank receives is the right to recover its loan from the value of the house should things go wrong, or should Harry and Sally move or die.

What Harry and Sally do with their money is entirely up to them. They can opt for a lump sum and give it to their children. They can use the monthly payments from the bank to pay their own bills. They can take the proceeds to Las Vegas and bet it all on red (although they really, really shouldn’t).

Since no repayments are made, the money borrowed from the bank (the lump sum or the monthly payments) attracts interest, and the amount outstanding under the loan keeps rising. But then the value of the house also keeps rising, goes the theory, so a sort of equilibrium is maintained. The trick is to die before you owe the bank more than the house is worth.

When the last surviving Harry or Sally dies, or sells the house, or moves out (for instance, to go into assisted living), the loan falls due for repayment, and this is made out of the proceeds of the sale of the house. If there is money left over after the debt is repaid, it belongs to Harry and/or Sally, or their heirs.

Everything I’ve read says that the cost of such loans is higher than the cost of a normal mortgage (which ought to be the first red flag), but this is something I have not verified. The costs of the transaction are generally added to the loan, so no money changes hands for costs.

The one thing I got right last week was my horror of such schemes, and I will briefly now explain the main reason that I did not mention last week. Other reasons will follow in the weeks ahead. I should point out that these are solely my views, and that I am a hard-hearted so-and-so who does not believe in a free lunch or the right to a free meal of any sort (or any other rights, for that matter, but that’s a different kettle of how’s your father).

The Number One rule in wealth accumulation is: Never Spend Capital. It bears repeating, and you might want to have it tattooed on your forehead, backwards, so that you’ll see it every time you look in the mirror: Never Spend Capital. This assumes, however, that you are able to make sensible arrangements for your retirement and for passing on your wealth, and that you love your children, and they you. It’s logical enough. You won’t accumulate wealth if you spend it. In my ravings last week, I assumed that everyone knew that. A further mistake on my part. Look! Here it is again: Never Spend Capital.

From the correspondence, it seems that, when money is involved, no love is lost between children and their parents. I was stunned by this, and remain almost incoherent on the subject. The collapse of family values is now complete, it seems.

More, much more, on this subject in the weeks ahead. For now, try e-mailing Shakespeare and see where that gets you. And for God’s sake, remember that your children and your parents are much more valuable than money. Alienating family for the sake of some dough is vile behaviour. I cannot believe that I had to write that sentence, but there we are.