Economic times are especially tough for seniors today. Many have worked for years expecting a nice pension, just to have the rug pulled out from under them when the company folded or they just cut back on benefits. Others are forced to continue working well into their 70's and 80's. Some will never enjoy retirement. This is a sad situation. The good news is there is now a solution for those who own a home.
The reverse mortgage for seniors is a government regulated program that allows seniors who are 62 and older to draw upon the equity in their home to supplement their social security and pensions. The beauty of the reverse mortgage is that it does not have to be paid back until the senior dies, moves or sells the home. Credit is not an issue as the reverse mortgage is determined by the equity in the home and the age of the applicant. The money can be used for whatever you choose, including home repairs, college for grandchildren, vacation and travel, long-term care or anything else you may need it for.
In most cases, if it sound too good to be true, it is; however, read on to learn about this wonderful program designed for those who really deserve a break in today's tough economic times!
How does a Reverse Mortgage Work?
A reverse mortgage, AKA (HECM), Home-Equity Conversion Mortgage is a loan based on the equity in your home. You trade the equity for tax-free income from a lender. The lender pays you in monthly payments, a lump sum or an equity line of credit you can draw on as needed, or a combination of these options. You still own your home and you are required to maintain homeowner's insurance, pay the property taxes and keep the home in good repair.
The loan doesn't have to be repaid until the senior dies, moves out of the home, or sells the home. At this time, the lender is to be paid in full, including any interest that has accrued. Any proceeds go to you or your heirs. In the event your proceeds do not cover the amount owed or your total withdrawals exceed the value of your home, your lender will be protected from loss by the Federal Housing Authority (FHA) insurance.
Most people who is 62 or over can get a reverse mortgage if they have equity in their home. Most states require counseling to be sure you understand what you are doing and no one is taking advantage of you.
As stated earlier, credit is no issue; the amount you can borrow is based on the value of your home, current interest rates and your age. The limit you can borrow is about 80% of the equity in your home. The amount you can draw increases if the value of your home increases over time. The government sets a total limit on what you can borrow based on where you live. In 2007, the limit was between $200,160 and $362,790, per year, even if your home is worth considerably more.
Reverse mortgages are a great solution if your income is low and your home is valuable. To determine if this is a good idea for you, consider how long you will live in your home. Closing costs tend to be high with fees based on the value of your home and the limit on federally insured reverse mortgages in your area. If you plan to move within the next few years, a reverse mortgage would not be a good idea. Talk to your local mortgage specialist to see if you qualify for a reverse mortgage and if it is the right option for you.
Ted Lewicki, president of Pillar Mortgage Corporation, specializes in reverse mortgages and financial planning for seniors. Ted offers a unique plan called the senior care package which includes financial planning for long-term care. http://www.pillarmortgage.com/ services Oakland County, Michigan with many clients in Waterford, Pontiac, Rochester, Auburn Hills, West Bloomfield, Keego Harbor, Milford, White Lake, Walled Lake, Wixom and neighboring cities and communities.