Reverse mortgages helps retirees' cash issues
Struggling on a fixed income? Solve your cash problem by taking a reverse mortgage, which let you borrow against their home equity and forgo repayment as long as they stay in the house.
Once somewhat rare, the number of such backward-looking loans has increased fivefold since 2001, according to the National Reverse Mortgage Lenders Association. The coming together of historically high home values and historically low interest rates means that people are able to take more equity out of their homes, and moderately than resisting the idea, boomer's are helping their parents get the loans, says Bronwyn Belling of AARP. (You can download "Home Made Money," a guide to reverse mortgages, at aarp.org/revmort )
To meet the requirements for a reverse mortgage, you must be at least 62 and live in the house as your principal residence. The loan, including interest, comes due only when you die or move from your home, at which point the profits from the sale can be used to pay off the balance. You or your successors get to keep whatsoever equity has built up since you took out the mortgage.
If the house's value falls below the loan amount, the lender absorbs the difference.
Along with the several reverse-mortgage programs, the most popular is the Home Equity Conversion Mortgage, backed by the Federal Housing Administration (search "reverse mortgages" at www.hud.gov). You'll commonly be offered four payout choices: a lump sum, an interest- earning credit line, monthly advances paid out over a set period or smaller monthly advances that last as long as you live in your house. You may combine a credit line with an advance or choose some other combination.
But don't anticipate pulling every last coin out of the equity treasure chest. The amount you get depends on your age, local housing costs, interest rates -- which adjust monthly or yearly -- and the type of payout you choose. (For estimates of what you can expect, go to reversemortgage.org )
Figure on getting no more than about 40 percent to 60 percent of the equity in your house.
Baltimore Reverse Mortgages
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