Reverse Mortgage Loan Blog

As investments like the stock market have tanked, many retirees are looking for ways to get their hands on more cash.

One asset that many of them do still have is a house that is paid off and owned outright.

A reverse mortgage lets retirees tap into that equity. The federal agency that oversees these types of transactions says these types of loans have hit a 20 year high. These are complicated transactions, however, and should be approached carefully.

Ann Brown thought she had her golden years all figured out. “I thought I had enough to last, but I had an unexpected bill, such as an automobile, and I had to figure out how to pay for it,” she said.

At that point, Ann decided to look into a reverse mortgage. She borrowed against the equity in her house, but will continue to live in it until she either moves or passes away. When that happens, the balance of the loan will be determined to ascertain if there is any money for her heirs.

William Hand, a financial broker explains, “A reverse mortgage is designed for the senior where he can now use the equity in his home to live on without making payment back against the house. So they have no payment whatsoever. The house remains in their name.”

To qualify, a homeowner must be 62-years-old. Older clients are able to get more cash upfront than younger applicants.

These are not simple deals to strike, and there are scams out there. That’s why it’s recommended that anyone interested in doing a reverse mortgage speak with a counselor approved by the Federal Housing Administration.

“There are a lot of protective measures for seniors to make sure they understand,” said W.B. Hand, another financial planner. He also says heirs should attend those counseling sessions because they will have different questions than the parents.

Ann says there were a lot of papers to sign, but she started receiving checks within six weeks. “It could see me through the next 15 years,” she explained.

She now receives an extra $1,200 a month to help balance her budget.

For more information on how these loans work and help finding a counselor, visit the Federal Housing Administration site.

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