Reverse Mortgage Loan Blog

Reverse mortgages are a good option for some seniors looking to supplement their income, but they aren’t for everyone.

Many seniors have equity built in their house, but some aren’t making enough money to get by. People in that situation might consider a reverse mortgage.

“Obviously it’s something that people are using because there’s a need, a financial need,” said Lisa Wolfe, a spokeswoman for AARP Delaware.

Wolfe said many Delaware AARP members are seeking more information on reverse mortgages.

In fact, the popularity is increasing throughout the United States. The National Council on Aging reports that the number of people taking advantage of reverse mortgages increased from 8,500 in 2000 to 39,000 in 2004. That trend is expected to continue, according to federal statistics.

A reverse mortgage is exactly what it sounds like: a loan against your home. Instead of paying the bank a monthly mortgage payment, the bank pays you.

When the homeowner moves out of the home or passes away, the loan needs to be repaid. The homeowner or heirs can sell the house and pay the loan or refinance it as a traditional mortgage.

“People I have talked to who are taking out reverse mortgages are really feeling this is a good option for them because it does enable them to remain in their own home,” Wolfe said, noting some seniors choose a reverse mortgage to help pay for health care costs. “They’re finding a need to either pay a large hospital bill or they’re having ongoing maintenance costs, such as dialysis.”

But reverse mortgages are not for everyone. Only people 62 years and older can apply for a reverse mortgage and the amount a person can get increases with age.

“If you have an annuity you’re expecting to draw on the rest of your life, if you only live 10 years you’re going to get a whole lot more” than if your life expectancy is longer than that, said Walt Lydic of Kaylor Kent Mortgage.

“If you’re living on social security and a pension, it’s just a wonderful tool to access your income without moving out of your house,” he said, noting that people in their 70s are probably the best candidates for a reverse mortgage.

But reverse mortgages have drawbacks. “Closing costs up front have been very expensive,” Lydic said, though he added that was changing.

There is also a downside for those living in Sussex County and other hot real estate markets.

“Since we’ve had such rapid appreciation, the amount that you can take out is limited,” he said. “If your home is worth $800,000, the most you could get was about $250,000.”

That too is changing, as the federal government is considering raising the caps, he said.

Kaylor Kent Mortgage has not done many reverse mortgages yet, but they are expecting an increase, Lydic said.

“The popularity is just burgeoning, just across the country, and it will continue,” he said.

“As we age, there’ll be more and more people who are interested in getting one of these things,” Lydic said. “It has been a great tool for people with a lot of equity.”

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