Reverse Mortgages: A Worthwhile Idea Especially In Today’s Economy

Reverse Mortgages: A Worthwhile Idea Especially In Today’s Economy

A number of our older clients (as well as their children) have asked us recently whether a Reverse Mortgage might help them with cash flow in these difficult times. Below is a brief review of the subject.

These are indeed tough economic times, particularly for seniors who need additional cash flow to supplement their Social Security payments and Pensions. A senior who saw his or her home as a “nest egg” in retirement, may now view it as a financial albatross. With the costs of fuel, taxes, insurance, lawn care, snow removal, home maintenance and, in many situations, the payment of the mortgage itself, home ownership may feel more like a curse than a blessing. The real estate market is struggling and seniors cannot afford to sell their homes until the market improves. What can one do?

A possible answer for homeowners in this situation is a Reverse Mortgage. A Reverse Mortgage was once considered an expensive way of extracting cash from your home and fell largely out-of-favor. This trend appears to be changing. Many credit unions, for example, are cutting their closing costs thereby helping homeowners, even some affluent ones, who want or need to generate additional retirement income.

In a nutshell, Reverse Mortgages allow people 62 years of age and older to convert their home equity into cash. Instead of the homeowner writing a check to the bank each month, the bank actually pays the homeowner, who may elect to receive the proceeds as a lump sum or line of credit. With new reduced fees offered by some companies, homeowners may be able to save many thousands of dollars on closing costs.

With a Reverse Mortgage:

  • the homeowner, not the lender, retains title to the home;
  • the proceeds are tax-free;
  • the homeowner is not required to make any monthly mortgage payments;
  • the homeowner’s retirement income is increased; and,
  • the homeowner can use the money to pay increasing health-care costs, pay for long-term care, make home improvements and, of course, enjoy the additional income derived from the Reverse Mortgage.

Qualifying for a Reverse Mortgage

  • you must be the titleholder of the property;
  • all borrowers must be 62 years of age or older;
  • any prior mortgage balance must be paid off at the time of closing, but you can use the money from your reverse mortgage to pay it;
  • your home must be a single-family home, a multi-family home with 2 – 4 units (one of which units must be your primary residence), or a condominium.*
  • no income or credit qualifications are required; and,
  • the homeowner must go through mandatory HUD-approved counseling.

Reverse Mortgages are more and more recognized by active retirees as a viable option to supplement their retirement income and allow them to remain in their home. Talk to us about them. We’ll give you candid advice and help you determine whether you are a candidate for a Reverse Mortgage.

*Co-ops do not qualify for Reverse Mortgages

 

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