Reverse Mortgages Become a Trend Among Seniors

[Apr 24, 2008.]

 

Reverse mortgages appear to be gaining popularity among older Americans.

If you are over age 62, you can have access to your home's equity without paying off loans, thanks to the reverse mortgage. The reverse mortgage transfers a portion of your house's value into cash, allowing you a reserve fund for paying medical costs, prescription drug costs, and household expenses.

One reverse mortgage consultant told a Florida newspaper that the reverse mortgage is the ideal solution for older homeowners in a financial predicament. He notes that, provided the homeowner is in his or her home for a substantial period of time, there's really no disadvantage to the program.
However, a homeowner should not try to obtain a reverse mortgage if he or she plans to sell the home within 3 to 5 years. That's because there would be few dollars to be gained following the sale.

Some homeowners who have been in their homes three decades or longer may find that they have as much as $300,000 in equity. Because they may be on a fixed income, such a hidden treasure can seem like a godsend. Just tapping 30% of the home's equity could be of tremendous help in paying skyrocketing medical bills.

Of course, such reverse mortgages can put a crimp in an adult child's inheritance. But it may be the only way to rescue a homeowner from a financial mess.

The Sarasota Herald-Tribune reports that 50,000 of the 13 million Americans eligible for reverse mortgages applied for them from autumn of 2004 to autumn of 2005. That's a substantial increase from the 7,000 reverse mortgages obtained in the year 2000. Given the fact that many Baby Boomers are now coming close to retirement, the number of reverse mortgages may increase exponentially. Homeowners do not have to repay the money provided they remain in their homes.