Reverse Mortgages

Many seniors often face the heart-rending decision of having to give up their homes because they can no longer afford to live in it, or they need the equity to pay for basic living expenses. And up until recently, their choices have been limited to either selling the home or taking out a new loan against the equity.

Selling has meant giving up a standard of living they’ve worked hard for and grown accustomed to, and “down-sizing” (or down-grading) into something more affordable. And taking out a new loan also means taking on a new monthly payment (to repay the loan) and often this is not a viable option because they don’t have the necessary income to qualify for the loan.

Enter Reverse Mortgage Options

Reverse mortgages have come in to the marketplace and provide a convenient way for seniors to keep their homes and access the equity without having to take on a new monthly payment obligation. When you do a reverse mortgage, the lender actually pays you! These are some options open to you:

• Take the loan as a large lump sum
• Take the loan in monthly installments over a fixed period of time
• Take the loan in monthly payments for the rest of your life.

You’ll need to check with the lender what your options are, and they will be based on how much equity you have, your age, and basic credit criteria like your credit score and how much other debt you have. There are many excellent information sources for seniors to find out more about the programs. For example, AARP has several good articles and often offers local workshops to help seniors understand how to use this product wisely.

These loans are highly regulated by the federal government as far as fees that can be charged and the terms of the loan, so as long as you’re dealing with a legitimate lender, there shouldn’t be too much difference between different institutions. As in other major purchases, don’t be afraid to get comparison quotes from a few places – don’t be bullied into signing up with someone you’re not comfortable with. Check with your local senior support group for help as well.

Keep Your Home, Maintain Your Lifestyle

A reverse mortgage can help you stay in your home and provide you with enough money to maintain your lifestyle. You are giving up a portion of your home’s equity to do this. Many seniors feel guilty about doing this, and will make a choice to live less comfortably and give up their neighborhood relationships, because they don’t want to take away from their children’s inheritance. I would encourage you to make choices that are best for you, your health, and your happiness – that is the best inheritance you can ever pass on to your heirs.

Don’t punish yourself because you lived responsibly and paid down your mortgage. If you need some of that money back now, take it. You’ve earned it. If you had that money in a savings account, wouldn’t you use it to live on? Think of your home’s equity as a different type of savings account and don’t feel guilty about using this asset for your needs.