More Americans Turning to Reverse Mortgages
It’s hard to live on $448 a month.
The Oshkosh Northwestern tells the story of Darlene Branson, 78, who turned to her home equity to help supplement monthly Social Security payments.
How did she do it? By taking out a reverse mortgage.
What is a reverse mortgage? It’s a loan that enables homeowners 62 or older to borrow against the equity in their home without having to sell the home, give up title or take on new monthly mortgage payments.
The reverse home loan proceeds can be used for any purpose. They can be taken out as a lump sum, through fixed monthly payments, a home equity line of credit or a combination of those options.
Branson joins a growing number of cash-strapped senior citizens turning to reverse mortgages. According to the Washington, D.C.-based National Reverse Mortgage Lenders Association, the number of FHA loan-insured reverse mortgages jumped by 77 percent nationally during the past year.
Darryl Hicks, associate director of the National Reverse Mortgage Lenders Association (NRMLA), attributes the increases to several factors:
- Rising household costs.
- Insufficient retirement income. Many people rely on Social Security, which may not cover all of their needs.
- Increased reverse mortgage awareness.
Whatever the reason, many people now see reverse mortgages as a viable financial planning tool. Here’s how a federally insured reverse mortgage works:
- How much you can borrow depends on your age, current interest rates and the value and location of your home.
- The government sets interest rates and fees.
- You are required to undergo mortgage counseling to make sure this option is ideal for you.
- After the reverse mortgage is repaid, the remaining equity is distributed to you or your estate.
The money you borrow can be used for anything and everything you want, including prescriptions, home improvement, travel and food. But that doesn’t mean it’s the right move for you. What you should do is talk to one of our licensed mortgage brokers and consider the pros and cons before you make your move.