Seniors and Reverse Mortgages

Added November 23, 2004 by Ilyce R. Glink

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Summary: Many seniors are living only on social security and each month are worried that they'll run out of cash before their next social security check arrives. Your retirement years shouldn't be the time that you wonder whether you can make it financially. Tapping into the equity of your home can help support you financially during your retirement years.

WGN-TV Show Notes - November 23, 2004

Are your parents just getting by each month on social security? There might be another source of income they could tap.

It would be nice to have a few extra bucks in your pocket, wouldn't it? In fact, many seniors are living only on social security and each month are worried that they'll run out of cash before their next social security check arrives.

Your golden years shouldn't be the time that you wonder whether you can make it financially. That's why you hear so much in the news about saving while you're young. The good news is that for most Americans, the biggest portion of their net worth lies in their home. Tapping that equity can help provide extra income, tax-free, for your golden years.

A reverse mortgage allows you to borrow against some of the equity in your home. You can think of a reverse mortgage as being similar to a home equity loan or line of credit, where you borrow against the value of the property.

But unlike a home equity loan, where you have to make payments each month, with a reverse mortgage, you won't pay a dime until you move out or the home is sold. How much can you borrow? Right now, because interest rates are low, you can borrow up to 75 percent of the value of your home.

According to federal law, you must be 62 years of age or older to get a reverse mortgage. The house must be mortgage-free, or nearly mortgage free, and it must be your primary residence.

You can use the cash for any purpose, although most seniors use it for home improvements and to enhance their income. The fees are capped by law at 2 percent of the loan amount, but some lenders have recently introduced new zero cost loans, so it won't cost you a penny upfront to get a reverse mortgage.

For more information, you might want to check out this new free DVD from Financial Freedom, which is the largest reverse mortgage lender in the country, or there are three excellent websites to go to.

RESOURCES

National reverse mortgage lenders association Ken Scholen's website American Association for Retired Persons (AARP) Note: Ken Scholen now works for AARP and maintains this website as well. To get a free copy of the financial freedom dvd: www.financialfreedom.com or call toll free (888) 738-3773

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