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Seniors Are Flocking
to Reverse Mortgages March 13, 2004 Record numbers of seniors are taking out
reverse mortgages and the federal government couldn't be happier. In fact, it's encouraging even greater use
of the technique, issuing grants to promote their use and offering
discounts in certain cases. With reverse mortgages, homeowners age 62
and older can draw money from equity they've built up over the years
without incurring new debt and without having to move out of the homes
they hold so dear. Steadily increasing home values and low
interest rates, coupled with pension depletions, stock-market losses and
increasing living costs, are driving retirees to the reverse mortgage as a
survival tool. To many, it's a godsend. Others simply hate
the idea. They're expensive and complicated, so check out all options and
have a competent legal or real estate professional review the documents so
you know what you're getting into and how much it will cost. If you are in or near retirement, the
phrase "house rich, cash poor" may ring true. The remedy, known
as the reverse mortgage, is jumping in popularity. As its name suggests, it's the reverse of
the mortgage you used to buy your home. Instead of making monthly mortgage
payments to a bank, the bank pays you. You're using the equity you've
built up over years. You don't make payments until you move out
of your home or die. At that point, you or your heirs have a year to repay
the amount you received, along with fees and interest, either through
refinancing or sale. If the balance equals or exceeds the value of the
home, it can be signed over to the lender. You or your heirs would never
have to pay more than the house is worth. If you're at least 62 years old and have
equity in your home, you probably can get a reverse mortgage on your
primary residence. You retain title to your home and still are responsible
for maintaining it and paying property taxes. Most reverse mortgages in the United States
are the Home Equity Conversion Mortgages, often referred to as HECMs.
Insured by the FHA (Federal Housing Administration), they're available
from private lenders. You find an HECM lender by visiting your local HUD
office or by visiting HUD's Web site. Fannie Mae, the government-sponsored
enterprise that buys mortgages in the secondary market, has a reverse
mortgage program called Homekeeper. The amount you receive depends on the
home's value, your age, interest rates and where you live. The higher the
value of your home and the older you are, the more money you can receive,
either as a lump sum, a line of credit, a monthly check or a combination. Reverse mortgage payments are not taxed and
don't affect Social Security payments. Reverse mortgages carry closing costs,
typically from 5 percent to 8 percent of the home's value. The costs are
high because you make no payments until you sell your home. Until then,
the interest compounds - in other words, there's not only interest on the
principal amount, but also interest on the interest. Lynn Boyd, a senior counsel of the American
Council of Life Insurers, says reverse mortgages can be a positive way to
fund long- term care if the appropriate safeguards are put in place. Not everyone agrees. Bonnie Burns, director
of consumer education for California Health Advocates, says it might not
be a sound economic decision for many seniors because they could strip out
the equity in their home and then not be able to continue with the costs
of long-term care, ending up with no care and no equity. With this problem in mind, many experts advise elderly homeowners to sell their homes and move into more manageable and less expensive quarters. This way they can get their built-up equity in a lump sum. Instead of paying interest, they can invest the money and earn interest and dividends. On the Web: (C) 2004 Seattle Post-Intelligencer. via ProQuest Information and Learning Company; All Rights Reserved Referral Mortgage does reverse mortgages
and can help you through the process. Apply Online
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