Recently the CBS Early Show featured a financial consultant who segmented several types of senior homeowners who might find a reverse mortgage useful.
The Need-Based Candidate: who has a chronic monthly cash flow crunch or is facing a major expense such as a medical or disability need, foreclosure threat, or divorce settlement. Many seniors want to pay off an existing mortgage with the reverse loan to free up dollars for other needs.
The Financial Planner Type: who may want to use the tax-free cash from a reverse mortgage for whatever they need or want instead of dipping into their retirement funds , especially during times of stock market volatility. Many seniors fear their savings may not last, or wish to keep their tax bracket lower.
The Enhanced Lifestyle Achiever: who might like to use the available funds from a reverse mortgage to make life easier and more enjoyable. They might use the money to purchase a vacation home, travel, update or add accessibility features to their home, or gift children or grandchildren.
A reverse mortgage enables homeowners, age 62 and older, to convert part of the equity in their home into tax-free cash. There are no income or credit qualifications and no monthly payments to make. Even seniors with a current mortgage may qualify, but the proceeds must first be used to repay any debt on their home. The FHA-insured Home Equity Conversion Mortgage (HECM) comprises about 90% of all reverse mortgages .
The senior always retains the title to the home and is responsible for home upkeep, taxes and homeowner’s insurance. Repayment of the loan is due with the last borrower permanently leaves the home. The repayment amount can never exceed the value of the home and any remaining equity always belongs to the borrower or their heirs.
Significant growth in the number of seniors taking advantage of reverse mortgage benefits is seen in year to year figures. According to research by AARP’s Public Policy Institute, numbers have increased from 6,600 reverse loans in 2000 to 107,000 loans in 2007. |