Reverse Mortgage Loan Blog

Retirement is not what is used to be as many Baby Boomers are discovering with little to no savings or pensions. Gone are the days where a person could quit a day job and relax in the comforts of a favorite hobby, travel or just plain take a nap. Today, people are working way past retirement age just to make ends meet because what was assumed to be waiting for them in Social Security and other benefits is not there.

Government cut-backs and the lack of preparation from reliance on traditional pension funds has forced changes from the safe stream of guaranteed annuities to self-managed 401ks. Retiree health-care programs are often eliminated. This common scenario leaves people desperate and is where mortgage schemes are capitalizing. While some are just plain fraudulent, others offer relief but — of course — at a cost. One of which is called a reverse mortgage.

According to Consumer Union, a reverse mortgage allows an individual over the age of 62 to borrow against the equity in his or her home to access immediate funds. This loan provides the borrower with a lump sum of cash, monthly payments or a line of credit. The term “reverse” refers to the fact that instead of the borrower making a monthly payment to the lender, the lender makes payments to the borrower, Consumer Union said. The attraction of the loan is that money does not need to be repaid until the borrower dies or leaves the home permanently. Generally, the borrower or the estate then sells the home to pay off the debt.

The potential market for reverse mortgages in Southern Utah is huge with the increasing population of older residents and the rapid growth that has driven up property values. While there are advantages of reverse mortgages because they offer seniors additional income and facilitate financial independence, there are disadvantages. Consumers need to make an educated choice as to whether a reverse mortgage will work in their particular situations.

Converting a home’s equity into tax-free cash sounds attractive to just about any one. However, a reverse mortgage can be expensive while promising uncertain benefits. For example, according to Consumer Union, a typical reverse mortgage may give $300 per month payments with a monthly compounded interest rate of 1 percent. Over the course of 10 years, the borrower will receive $36,000, but by that time the loan balance will be almost $70,000 — almost twice as much as was received, Consumer Union reported.

That’s fairly unattractive to just about any one. As older Southern Utah residents find themselves the target for such programs, go into them with eyes wide open. Don’t hesitate to shop around and get information from at least two companies to compare their percentage rates and terms of service. It may be discovered that not only did you protect yourself from making a poor financial decision, you may have saved yourself from leaving large debt to your posterity to remember you by.

Having resources to draw upon when money is tight is of comfort, but a personal sense of security is the real relief that gives you the ability to lie back, relax and count the clouds as they go by. It may not completely fit the definition of retirement with being financially stable and free of debt, but it’s close. Something is better than nothing, just make sure that something is right for you.

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