Should Retirees Consider a Reverse Mortgage?
Some retirees have a financial plan that entails selling their current home and moving into an apartment or smaller
home. The proceeds from the sale would be used to help fund their retirement. It might sounds like a good plan,
but with the current economy and with home prices the way they are, the amount that would be received from
selling might make them feel weak in the knees. Also, moving is not for the faint at heart and apartment living
maybe a lot different then what most would expect.
For many retirees, this is not a dream but a current reality. If you’re finding yourself or a loved one in this situation,
then you may want to take a look at the government insured reverse mortgage.
A reverse mortgage enables homeowners, age 62 and older, to convert a percentage of the equity in their homes to
cash, without selling the property. The homeowner always retains title to the home and would still be responsible for
the taxes, insurance and maintenance. The homeowner or their estate ultimately has to repay the amount used, plus
interest and fees, but repayment is never due until the homeowner dies, sells the home or permanently moves from
the home. At no point is the homeowner or their estate responsible for any excess funds needed to sell the home if
more is owed than what the home could be sold. However, if the heirs decide to retain the home, the entire
outstanding owed balance would be due.
Many flexible options
Reverse mortgages offer a lot of flexible financial options. The homeowner can receive money from the program as a
lump sum, fixed monthly payments for the rest of their life, a line of credit that can be used to be drawn upon in the
future, or any combination of the three. Any money received is not taxed and is not considered as income.
Additionally, the reverse mortgage can be changed down the road to a different plan if the need arises.
The beauty of the reverse mortgage is to know that the homeowner can never be forced to leave the home no matter
how old they may become as long as the property taxes and insurance payments are current. The amount of money
received depends on such factors as age, current interest rates and the value of the home. Income and credit history
are not considered for qualification which makes the program more attractive for those who have had trouble
qualifying for other traditional loan products.
Of course, there are draw-backs. Compared to a regular mortgage or home-equity loan, the closing costs are usually
higher. Therefore, reverse mortgages are not for everyone and should not be entered into lightly, but the benefits of
the reverse mortgage may justify the higher costs.
Advice to remember
It's a good idea to shop around to see if the mortgage company is knowledgeable and is approved with FHA before
committing to use them. Not all mortgage companies are approved with FHA to do reverse mortgages. It would also
be a good idea to use a company that specializes only in reverse mortgages because of the vast difference between
reverse mortgages and regular forward mortgages.

Another piece of advice is to use a company that is a member of the National Reverse Mortgage Lenders Association.
Members of NRMLA subscribe to a higher code of ethics focused on protecting seniors.
Remember to not sign anything unless the process is made clear to you. If you’re unsure about anything during the
process, invite a friend or family member to be included. The main goal of the reverse mortgage program is to have
peace of mind now and in the future.
Robert E. Jones is a Reverse Mortgage Specialist. For more information about the reverse mortgage program please
visit http://www.reversesecure.com/.