April 2011

Money, Seniors and Reverse Mortgages

I am providing a copy of a short article that was recently published in the Chicago Tribune newspaper about the perception that reverse loans are a “last resort” for a senior who is short on  money to pay for their monthly cost of living expenses.   I have and continue to feel that, that term is insulting because it’s implies that the loan program is something dreadful and is the worst thing that a senior could do to themselves when in fact it can make the difference between living on the streets or remaining in their home.

However, the writer concedes that with the changes that have taken place over the years to the government program, there is more oversight and regulation in place to protect the Seniors best interests, plus they have become more affordable as well.  And in many instances they have made the difference for a Seniors ability to survive and remain in their home and not rely upon their adult children for assistance.

Here’s the article:
A Chicago Tribune Q&A, “New Reverse Mortgage Opens Option for Seniors,” addresses reverse mortgages as a retirement option, and cites the Saver as a new choice for seniors considering a reverse mortgage.

“The question poses the financial problem of many seniors who are ”brick rich and cash poor,” and cites a case of an elderly widow with a $400,000 home she owned free and clear, but whose income was so low, she could not afford $2 Meals on Wheels payments.

“If reverse mortgages had been in existence then, it would certainly not have been a last resort. ‘Godsend’ would be more like it,” the question states. “She could have lived like a queen (albeit a modest one) for the rest of her life tax-free.”

While the author of the answer still says reverse mortgages are a “last resort,” he further says that new laws and the new FHA product are slowly changing his mind.’

‘Last year Congress increased the loan limits on reverse mortgages to $625,000’ he writes. ‘Additionally, the FHA announced a new version of the old reverse mortgage, the HECM (home equity conversion mortgage) Saver program. Although this new product does not allow homeowners to take as much money under the program as with the older version, the upfront closing costs are considerably lower. If you are 62 or older and have a house that is free and clear, or only has a small mortgage, you may be a candidate for this program.’ ”

A reverse loan is government insured and is a very safe option for any senior to considering using it to increase their cash flow and continue to own their property.   Within the last several years more variations of the program have become available including a fixed rate making them just that more attractive as an option for money.

Anyone who is seeking information or is considering using one as part of their financial plan, should set an appointment for the counseling provided by HUD approved counselors and learn about the benefits of the program and let go of the misconceptions and negativity.

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