March 14, 2011
The economy has wreaked havoc on the bank accounts of many older adults. For some older adults who own their homes, reverse mortgage can be a way to access additional cash. Resources below can help seniors determine if reverse mortgage is a good option for them.
Q. I've heard a lot about reverse mortgages and wonder if this could be an option for us. We're an 83-year-old couple, living on fixed incomes, who are running short on cash. However our home is paid for. How do reverse mortgages work and what should we know about them? What other ways can we get assistance to remain at home?
A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash, according to the U.S. Department of Housing and Urban Development (HUD).
The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until borrowers no longer use the home as their principal residence. The loan and interest are paid off when the property is sold.
To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older, who owns a home outright or has a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan. The owner also must live in the home.
You can contact the Housing Counseling Clearinghouse at 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.
Reverse mortgage fees may be high, although the fees are rolled into the loan and not paid up-front. It's important to calculate the cost of a reverse mortgage against what you would gain, because once you enter a reverse mortgage agreement, the mortgage company essentially owns your home. Discuss your options with an attorney. You also can receive free information about reverse mortgages by calling AARP at 1-800-209-8085.
Many seniors use the extra cash from a reverse mortgage to supplement Social Security, meet unexpected medical expenses, make home improvements and more, such as hiring at-home help to remain independent. An option for help at home is Home Instead Senior Care®, a company that hires CAREGiversSM who can assist you with non-medical tasks such as meal preparation, light housekeeping, medication reminders, transportation, errands and shopping.
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