Reverse Mortgages: A Great Opportunity

Not familiar with reverse mort­gages? You should be. A grow­ing number of seniors have been buying these innovative loans in recent years to augment retirement income, pay for long term health care, or even pay for that dream vacation. According to HUD, the number of reverse mortgages issued this year has more than quadrupled from the early 1990s, when the products were first introduced.

 Consider that there are over 20 million seniors with more than $2 trillion in home equity, according to 2000 census figures, and you will begin to appreciate the potential opportunity these unique loans offer for seniors today.

 Reverse mortgages explained

 Reverse mortgages enable senior homeowners 62 years or older to convert part of the equity in their home into tax-free income with­out having to sell the home, give up title, or take on a new monthly mort­gage payment. Borrowers will never be forced to leave their homes, providing they make their real estate property tax and insurance payments.

 There are three types of reverse mortgages: the Home Equity Conversion Mortgage (HECM), Fannie Mae HomeKeeper (HK) and private reverse mortgage prod­ucts offered by several lenders and designed for higher value homes.

 Borrowers can choose to receive the reverse mortgage funds as a lump sum, monthly income (for as long as they remain in the home), line of credit, or any combi­nation. They make no monthly mortgage payments on a reverse mortgage during the life of the loan. The loan becomes repayable when the borrower sells the home or per­manently moves out. In addition, the repayment amount can not exceed the value of the home and the equity can be used for any purpose.

 An important consumer protection built into these loans is the require­ment for independent third-party counseling prior to application. This counseling session serves to provide an objective review of the program for the senior and their advisors to help them decide if it is the correct option.

 Reverse mortgages, although distinctly different from traditional mortgages, still are mortgages and have the same basic cost structure for closings costs. These fees would include items such as appraisal, title insurance, document fees and other typical closing costs. One dif­ference is that the closing costs of a reverse mortgages are generally funded in the loan, so the senior borrower has no out-of-pocket expense. Qualification for this loan is simple, as there is no income qualification and minimal credit review.

So if you think that reverse mort­gages might be a good decision for you or your parents, a great resource is the National Reverse Mortgage Lenders Association (www.reversemortgage.org), a national nonprofit trade association for financial services involved in reverse mortgages in the U.S. and Canada. NRMLA promotes aware­ness of reverse mortgages, keeps members informed of legislative and other developments, and rep­resents the industry in Washington, D. C.

 And for answers to your specific questions or an illustration of how much benefit you might qualify for, contact me at tscabareti@aol.com