When is a reverse mortgage the right choice?
Non-profi t credit
counseling agency Take
Charge America shares
considerations for senior
homeowners
With today’s booming economy and rising home
values, many seniors are considering a reverse
mortgage to increase cash fl ow during retirement.
Zillow reports that home values are increasing
at the fastest pace since June 2006. Meanwhile,
retirement and healthcare costs are also on the rise
– and seniors may feel the pinch.
“Many seniors are house rich but cash poor,” said
Mike Sullivan, a personal fi nance consultant with
Take Charge America, a national non-profi t credit
counseling and housing counseling agency. “A home
equity conversion mortgage – commonly called a
reverse mortgage – may provide quick access to cash,
but it’s important to consider all of the factors.”
Reverse mortgage loans, available through HUD-
approved lenders, allow homeowners 62 and older to
convert part of their home equity into tax-free cash.
But, like with any loan, there are expenses, terms and
other fi ne print to consider:
Sullivan offers six considerations for seniors
considering a reverse mortgage:
Fees: Upfront fees, including mortgage insurance,
origination fees and closing costs can be signifi cant.
However, the fees can be wrapped into the reverse
mortgage, which increases the loan amount but helps
borrowers avoid out-of-pocket expenses at closing.
Existing mortgage: Seniors with an existing
mortgage – or any other liens against their home –
must pay off the loans with the reverse mortgage. In
other words, seniors can’t have a traditional mortgage
and a reverse mortgage at the same time.
Taxes and insurance: While seniors don’t have to
make payments against a reverse mortgage, they still
must pay property taxes and homeowners insurance
– or they risk foreclosure.
Home maintenance: Seniors must pay out of pocket
for home maintenance or repairs. They can’t take out
a home equity loan or second mortgage to cover these
costs.
Repayment: The loan is due when the borrower
sells the home, lives away from the home for 12
consecutive months, fails to pay property taxes or
insurance, or passes away. Given the costs of a reverse
mortgage, it may not be a good option for a senior in
very poor health or someone who intends to move
within a few years.
Equity: The home equity is reduced by the amount
of the loan. Typically, the funds are repaid when the
heirs sell the house. If they elect not to sell, heirs are
responsible for repayment of the loan.
To obtain a reverse mortgage, the U.S. Department
of Housing and Urban Development requires seniors
to undergo reverse mortgage counseling from
an approved third-party organization like Take
Charge America. Certifi ed HECM counselors help
seniors understand the loan terms, fi nancial and tax
implications, and alternatives. To learn more, call
Take Charge America at (866) 528-0588.
About Take Charge America, Inc.
Founded in 1987, Take Charge America, Inc. is
a nonprofi t agency offering fi nancial education and
counseling services including credit counseling,
debt management, student loan counseling, housing
counseling and bankruptcy counseling. It has helped
more than 1.6 million consumers nationwide manage
their personal fi nances and debts. To learn more, visit
www.takechargeamerica.org or call (888) 822-9193.
Contact:
Taylor Holmes
Aker Ink
(602) 616-3781
[email protected]
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Senior Connections HJ.COM
Senior
Connections November 2018
5