PROGRESS BY SHIFTING TO "REVERSE”
Popularity of Reverse Mortgages is growing as we age.
Fiscal 2004 showed a record of 37,829 reverse mortgages taken out by seniors according to the Housing and Urban Development Department. (age 62 makes a Senior for reverse mortgage eligibility)
Fiscal 1990 shows issuance of only 157 mortgages in this category. For the first fiscal months of 2005 there are 16,731 reverse mortgages showing.
Unlike the traditional mortgage we have all worked to retire, there are no monthly payments due. The loan is recovered from the borrower(s) estate or sale if both borrowers should move away.
Additionally, there are no credit requirements. The loan is secured exclusive by the real estate that is a principal residence.
Peter Bell, President of the National Reverse Mortgage Lenders Association has been quoted regarding some common misconception.
Initially, the title stays with the owners. The lender simply has a lien on the property. If a borrower were to "hit a jackpot" the loan could be repaid at the borrower's convenience.
Amount available to borrow is dependent on age, interest rate at the time of the application, and the value of the home. Different areas are rated differently.
There are options on how the loan would be structured. The money can be taken in a lump, in monthly payments or a combination of both dependent on the borrower's needs and wants.
If the reverse mortgage is federally insured, which most are, the borrower can never owe more than the loan, even if something should happen to the value of the property.
The funds are not taxable and have no effect on Social Security or Medicare. They can alter eligibility for other government programs such as Medicaid.
Drawbacks noted for the loan are the upfront costs that are part of any mortgage. The loan costs typically run 5% of the home's overall value, not the amount of the loan.
Federally insured loans are limited by area and value of the property with this year's limits ranging between $172,632 in rural areas to $312,895 in metropolitan areas.
One requirement is that the borrowers meet with a counselor to be clear on the loan and conditions before receiving the loan.
For those people living on limited income and having needs and wants that can be paid with money that is equity in a house that the borrowers do not have to repay, is an answer from our government, like the 1934 invention of the 30 year fixed mortgage that enabled us to get into the houses we now enjoy.
We may see progress in our future senior years by prudent management of the equity in our homes through the use of Reverse Mortgages.
For more information: Dee Klein, ALTA Financial