Retirees
stay in home with help of Reverse Mortgage
BIRMINGHAM, Ala., May 18 /PRNewswire/ -- If
you're a retiree who has a lot of equity tied up
in your house, but can't find money for needed
repairs; a reverse mortgage could be the
solution to your problems.
The reverse mortgage can provide monthly
payments or a line of credit to be used as
needed. Some people like monthly payments to
improve cash flow. Others opt for the line of
credit that will give them the money for
unexpected expenses -- like house repairs or
medical bills.
The Home Equity Conversion Mortgage program (HECM)
is insured by the
Federal Housing Administration (FHA) and has
been around since 1991. It
enables a homeowner over 62 to borrow against
the equity in his or her home and repay the loan
only after the home is sold or no longer the
borrowers primary address.
The reverse mortgage program originally was
created to help
cash-strapped senior citizens stay in their
homes longer, but it can serve
other purposes as well.
Some seniors find it makes sense to use a
reverse
mortgage on their primary residence to finance
the purchase of a second
home.
The amount of money available through a reverse
mortgage depends on the senior's age, home
value, interest rates and the local FHA lending
limits.
A two percent upfront insurance payment
guarantees that the owner will
never have to pay back more than the equity in
the property, regardless of how much money is
borrowed or what happens to the real estate
market.
The federal government sets the fees and
interest rates, but seniors
still need to determine if a reverse mortgage is
a good deal for their
situation. The upfront costs and interest rates
are generally higher than
for a mortgage.
The FHA requires that seniors interested in a
reverse mortgage to talk
with an independent counselor before the loan
can be set up.
This article was written by Benjie Lloyd,
Certified Senior Advisor and
president of his own Birmingham, Alabama-based
retirement planning and asset preservation firm,
Senior Strategies. He is also the host of "Money
Minutes," the greater Birmingham area's weekly
half-hour radio show dedicated to retirement and
estate planning topics, including reverse
mortgages, long-term care insurance, taxes,
building wealth and growing and saving money.
