REVERSE MORTGAGE! OK, in TODAYS MARKET?

Bud Zeller — Tue, 30 Nov 1999 07:00:00 +0000

Reverse mortgages have been around since 1989, but they are rapidly gaining in popularity. The complexity of reverse mortgages makes it difficult for the average senior to separate myth from reality. The number of reverse mortgage origination’s doubled between 2003 and 2004. These numbers may continue to double each year.You must be at least 62-years old to get a reverse mortgage. They are designed to help financially strapped seniors meet their living expenses and to stay in their home. A reverse mortgage allows the homeowner to tap into their home equity without having to make monthly payments.

Reverse mortgages allow you to receive money in several ways. The most popular is the equity line of credit. This way you only borrow money as you need it. You can also receive a lump sum or fixed monthly checks for the rest of your life, much like an annuity or pension. You can even receive a combination of these options. The amount you receive depends on your age, the value of your home and even the area in which you live.

A reverse mortgage is still a loan, but it’s not paid back until the last mortgage holder dies, your home is sold or it’s left unoccupied for 1 year. You (or your heirs) would receive any money left over after the reverse mortgage is paid. If the house sold for less than the loan amount, the lender would have to eat the loss.

A reverse mortgage can work well for seniors who have a limited income and would not otherwise be able to make it without tapping into their home equity. A reverse mortgage can be a low-risk way for seniors to remain in their home for the rest of their lives. That’s why HUD created reverse mortgages in the first place, to help cash-strapped seniors stay out of poverty without losing their homes.CAUTION: Seniors may be enticed into these mortgages by the idea of it being “free” money – it is not! If you spend your home equity now on non-essential items, you won’t have access to that money later should you really need it. Be very hesitant if you are approached by a mortgage broker by phone, seminar or mail. Therefore, consult with more than one knowledgeable source before taking action. You should also request and carefully analyze all the cost, fees, points or other charges. Some of these are negotiable, so review the required “Good Faith Estimate”, perhaps with another expert! Most local lenders like ones we have in Placerville, California, are glad to provide “free” information.

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REVERSE MORTGAGE! OK, in TODAYS MARKET?