The Fate of Social Security

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Reverse Mortgages

You may have heard the phrase, “reverse mortgage,” used at some time by friends, family, former co-workers or your financial advisors. Seemingly straightforward, the phrase denotes a unique type of homeowner’s loan that has become increasingly popular among seniors. So popular, in fact, that the National Reverse Mortgage Lenders Association (NRMLA) reported a growth of 77% in reverse mortgage loans for 2006.

Simply put, a reverse mortgage is a loan that allows homeowners, 62 or older, to borrow against the equity in their home—without having to take on new monthly mortgage payments, give up title to, or sell their homes.

Loan applicants must:

  • own their home
  • be 62 years of age
  • have enough equity in their home to qualify for a reverse mortgage loan

There is no special income or medical requirements, and neither your Social Security nor Medicare is affected. For some applicants with Medicaid, benefits could be affected—depending on how quickly proceeds were expended. Check with your local Medicaid expert if you feel you may fall in this area.

A fully qualifying reverse mortgage has no monthly payments due while the loan is outstanding.

Reverse mortgage repayment does not occur until the borrower moves from their home permanently—and repayment cannot exceed the value of the home. Once the repayment amount has been satisfied from the sale of the home, any remaining equity goes to the borrower, or their estate.

Peter Bell, President of NRMLA stated in October: “More seniors are recognizing that traditional retirement tools, such a IRA’s, pensions and 401(k)s are not providing sufficient income to fund everyday living expenses and healthcare.” Mr. Bell continued saying, “…more retirees are recognizing that the home they have lived in for so many years can now take care of them by using a reverse mortgage to access the equity accumulated over 20, 30, 40 years…”

The NRMLA has an excellent website, that provides extensive information on reverse mortgage loans. Easy to navigate, the home page has a reverse mortgage calculator for a quick look at a visitor’s loan potential, plus a one-click Locate a Lender button that displays reverse mortgage lender information by state.

AARP (formerly the American Association of Retired Persons) is a staunch supporter of all things senior and a visit to their website reveals information on reverse mortgages that is well presented, easy to comprehend and very comprehensive. Articles on reverse mortgage fundamentals, eligibility requirements, repayment facts and option scenarios to better explain selling your home versus applying for a reverse mortgage, will all serve you well in learning about the potential in this wealth management tool.

The U.S. Department of Housing & Urban Development (HUD) website also provides excellent information on reverse mortgages, bringing in the additional elements of government programs and precise FHA information.

While a reverse mortgage may be the perfect choice for you, or someone you know, all experts stress that no one should approach application for a reverse mortgage on their own. HUD approved specialist counseling on reverse mortgages is available through AARP, the National Foundation for Credit Counseling and Money Management International. Each of these fine organizations can help you determine if your situation is suited to a reverse mortgage loan and can assist you in being well-informed and fully prepared to approach the loan process.

If you feel a reverse mortgage could be an answer for your retirement income concerns, visit the AARP or NRMLA websites and take a look around—your answers may be within easy reach.