If you’re over 62 years of age, own a home, and it’s almost paid off, you might qualify for something that’s being called a “reverse mortgage.”
The reverse mortgage program allows seniors to borrow against the market value of their home and then use the money to supplement their income. They can take either a lump sum payment, get it monthly, or use it like a line of credit. The best part about it is that it’s not like a loan; seniors don’t have to pay it back, as long as they live in the home.
What’s the catch? Right now there doesn’t seem to be one, except making sure that the value of your home hasn’t decreased to a degree where you won’t get any real benefit out of it. The best thing about most homes that were purchased 30 years ago is that their value easily outstrips what it was when purchased. However, in most communities across the country, the value of homes has dropped, so the extra money might not amount to all that much on a weekly basis. Taking a lump sum might help if there are things that need to be fixed, however.
What’s in it for lenders? They’ll be able to recover their money when your house is sold. Of course, a big part of this depends on two things: one, which the original mortgage is finally paid off; two, that any other debts against the home have been paid off, which has to occur before seniors can qualify for the loan. Also, homeowners are still responsible for general upkeep of the house, property taxes, and insurance.
Of course, there are many things to consider if a senior is going to do this. One, if you decide to tap into it early and live a long time, you might run out of the money you’ve set aside if you’re paying yourself too much. Two, there are fees involved with doing it, and if you don’t keep up on the fees and payments, lenders could request full payment all at once.
If a senior can afford it, the best thing to do is to use it as a line of credit, having money available if it’s needed at a later date, such as for medications or other emergencies. For others, taking money out and, if they believe the market is ready to recover, putting some of that money to work for them to grow it and potentially have more funds to use as they get older.
Overall, it’s nice to have something to potentially fall back on in a time of need for seniors.
My grandparents just did a reverse mortgage and it has really helped them out. I’m very surprised that more “older” people do not take advantage of this type of money saving opportunity. I really don’t think a lot of them know about it.