Understanding reverse mortgagesPublished 11:01am Friday, August 3, 2012
Dear Savvy Senior,
Where can I get reliable, unbiased information on reverse mortgages? My wife and I are thinking about getting one but want to do some research first.
For seniors that are house rich but cash poor, a reverse mortgage is a viable option, but there’s a lot to know and consider to be sure it’s a good choice for you. Here are some tips and tools to help you research this complex financial product.
Let’s start with a quick review. A reverse mortgage is a loan that lets older homeowners convert part of the equity in their home into cash that doesn’t have to be paid back as long as they live there.
To be eligible you must be age 62 or older, own your home (or owe only a small balance) and currently be living there.
You can receive the cash either as a lump sum, a line of credit, regular monthly checks or a combination of these. And with a reverse mortgage, you, not the bank, own the house, so you’re still responsible for property taxes, insurance and repairs.
Currently, 99 percent of all reverse mortgages offered today are Home Equity Conversion Mortgages (HECM), which are backed by the Federal Housing Administration.
Repayment is due when you or the last borrower dies, sells the place or lives elsewhere for 12 months. Then you or your heirs will have to pay off the loan (which includes the money you borrowed plus accrued interest and fees) either with the proceeds from selling the place, or if you want to keep the house, with money from another source.
To get a better handle on reverse mortgages and how they work, there are several excellent resources you can turn to for reliable information, but you’re going to need access to the Internet utilize them.
To get started, the National Council on Aging recently created a free new website called the Home Equity Advisor that’s designed to help you think through the best way to leverage your home – a reverse mortgage isn’t your only option.