Reverse Mortgage Often Allow Seniors To Remain Independent
Senior homebuyers across the nation are now turning to a new solution for cash income: their home. From paying for home maintenance or modification, to taking a well-deserved vacation, or even paying for prescription drugs and home healthcare expenses, reverse mortgages are providing the means for seniors to improve the quality of their life.
Life expectancies are now higher that ever before. For instance, a 72 year-old female is expected to live another 13.5 years! Unfortunately, however, seniors often out-live their retirement savings, which are not typically adjusted for inflation. They are dealing with reduced interest income from investments, the bearish stock market, and the typically rising cost of living that comes with aging. In fact, according to SRI Consulting Business Intelligence, 58.8% of all seniors carried some debt last year, compared to only 35% in 1992. Ironically, if most seniors could only get out of debt, they would be able to live on their monthly income. Not surprisingly, older Americans are now the fastest-growing group to find themselves in financial trouble.
But all the news isn't bad. Most seniors have been the beneficiaries of tremendous appreciation in the value of their homes. Homes that were purchased in the 40's and 50's and 60's have increased in value ten fold or more. And it's this huge untapped asset source that can now give seniors that cash or income stream they need to improve the quality of their life. All this can be accomplished with a reverse mortgage. And "greater awareness of the product and falling interest rates have contributed to record demand," says Peter Bell, president of the National Reverse Mortgage Lenders Association.
With a reverse mortgage, homeowners at least 62 years in age can capitalize on the equity they have in their homes to be used as the basis to qualify for a government-backed Fannie Mae or FHA loan. But unlike traditional mortgages or home equity loans, a reverse mortgage does not have to be repaid until the last surviving homeowner sells or permanently leaves the residence. No matter how long they live, and no matter what happens to the value of their home. The older they are, the more money they qualify for.
With a reverse mortgage, you never make a loan payment. And most, if not all, of the closing costs are paid for from the proceeds of the loan itself. You always retain the title to your property and will never owe more than your home is worth. And, in fact, most borrowers retain a large amount of equity in their home, which will benefit them when they sell or benefit their beneficiaries upon their death.
And best of all, there are no income or credit requirements with a reverse mortgage. The amount of money you may qualify for is based solely on the amount of equity you have in your home, where is it located, the age of the youngest borrower, and current interest rates. That's it!
When I first met Betty, she thought that she was going to have to sell her family home in order to raise the capital she needed just to make ends meet. Her savings had dwindled to about $3,000 and she was living on $913 per month in social security plus a pension of $140 per month. Her medicines were costing her up to $600 per month. She had no money for extras and could barely buy food AND medicine. She did, however, own her home, which was worth about $200,000.
Even though Betty was on the young side (67 years old) and had a small home equity loan, she was able to get a reverse mortgage, which paid off her existing loan, which saved her $228 per month. She is now receiving $750 per month for seven years plus she has a credit line of about $26,000 available to her, which she can use however and whenever she wants. Because of this reverse mortgage, Betty was able to remain in her family home and can now afford her medicines. Plus she even has a little extra money each month! And she can count on the money being deposited directly into her checking account on the same day each month. The quality of her life has improved tremendously.
But it's not just cash-strapped seniors like Betty who are benefiting from reverse mortgages. More and more often, seniors who are fortunate to have assets at their disposal are deciding not to liquidate them. Instead, they are letting these assets continue to work for them by growing and throwing off income. A reverse mortgage can often provide that lump sum amount needed so seniors can do things like take that around-the-world cruise, or buy a vacation home, or fund a college education for a grandchild, or buy the things they don't want to wait for any longer.
Why not use the wealth in your home to help you enjoy the life you have worked so hard to deserve? By putting your greatest asset to work for you, you may truly be able to make these years your golden years!