Planning to Retire

More Seniors Consider Reverse Mortgages to Finance Retirement

December 11, 2008 RSS Feed Print

Most seniors don’t use their home equity to finance retirement. But it is a back up plan if catastrophic expenses strike. And for some seniors that time is now.

Seniors took out 112,100 Home Equity Conversion Mortgages, a government-backed reverse mortgage, in fiscal year 2008, which ended September 30, up from 107,558 in 2007, according to the Department of Housing and Urban Development.

Even more seniors struggling to pay their bills may consider reverse mortgages next year. A survey of 800 age 65 and older homeowners released this week found that one quarter are either borrowing against their home or trying to sell it in order to generate income to survive the economic crisis, Crestwood Associates and Golden Gateway Financial found. The Oakland, Calif.-based Golden Gateway Financial also reports a 200 percent increase in calls to its reverse mortgage help center involving senior citizens facing foreclosure in the past three months.

New rules went into affect in November that make reverse mortgages a better deal for consumers. Older homeowners can now borrow up to $417,000 with federally insured reverse mortgages. And the fees that lenders can charge were lowered to origination fees of 2 percent on the initial $200,000 of the home's value (lesser of the home value or county lending limit) and 1 percent on the balance thereafter, with a cap of $6,000.

Here’s how to tell if a reverse mortgage is right for your financial situation.

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Honestly, I sell Reverse Mortgages and I do it with out guilt. Some of the homes I have been in, the seniors cannot afford food or their prescriptions because they are paying their monthly mortgage and they have equity tied up in their home that only their children will benefit from. The reverse allows the homeowner to live in their home without fear of foreclosure, the ability to purchase needed items and more often than not, make needed repairs on the home. Yes the bank profits from the mortgage, but you can't tell me that starving to death is better. The only ones that should have any concern about it are the heirs to the property, and if the heirs care more about how much money they get than mom/dad or the grandparents living comfortably, then shame on them. Even those that are doing okay financially, we can almost always lower their interest rate, make repairs on their home and give them cash to do what they want with, they can make monthly payments on the note just as a conventional mortgage, the only difference is that if they have a bad month, they don't have to make the payment. Last week I had two seniors who were about to be booted out to the streets because they couldn't make their monthly mortgage payment, they had no where else to go, so the reverse saved their home. Now what would have happened even if they could have made their payment, the bank would have gotten the home and they wouldn't have been able to utilize their equity. Reverses are not a bad deal, but you have to have an honest Loan Officer who will explain the ins and outs.

Edward of OK 5:02PM February 12, 2009

Its' amazing that people will pay $400,000 over a 30 year period for a $150,000.00 home ( 30 year fixed 6%) with the possibility of foreclosure constantly hanging over their heads. ( if you don't think so don't pay your mortgage). then say that Reverse Mortgages are costly. I don't know what the numbers are but an alarming number of Seniors are loosing their homes or their golden years are tarnishing. Reverse Mortgages are a tarnish removing and tarnish preventing product. P.S. Why do children think they are owed something from their parents? Haven't they given enough?

LC of NC 10:00AM January 18, 2009

Pardon me, naysayers, but I have seen each of the following take place:
-a senior who uses reverse mortgage proceeds to buy an insurance policy worth twice the value of his house. His beneficiaries will receive that money tax-free, as well as the proceeds from the house when he dies and they sell it. Leverage, not need.
- a couple who used their primary residence to buy a cabin in N. Carolina they use every year to host a family reunion. They will not make a payment on either property. Lifestyle enhancement.
- a gentleman was two weeks from foreclosure although he only owed $35,000 on his $150,000 home. He could no longer make the payments. With a reverse mortgage, his home was saved from foreclosure, he can live there the rest of his life without making a single payment, and he got another $40,000 to use as he sees fit. Saved his home.
Cost too much? I think not. Nothing is good when used inappropriately. Go blame the Wall Street bankers and stock brokers who greedily bought sub-prime loans and lost folks half their retirement savings. Now people are turning to their last remaining asset, their home.

JB of FL 9:30AM December 15, 2008

More Seniors Consider Reverse Mortgages to Finance Retirement

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