Reverse Mortgages for luxuries

Homeowners are using reverse mortgages to do everything from buying airplanes or recreational vehicles to renting apartments a few months a year in Paris.

Another use becoming more common: Purchasing a second home for a vacation getaway. With property values soaring in recent years and interest rates near record lows, an increasing number of homeowners are deciding to enjoy the rewards of having paid off their house.

All of this is a far cry from just a few years ago when reverse mortgages were generally considered loans of last resort for seniors to avoid foreclosure, make necessary home repairs, or simply cover living expenses, such as prescription drugs.

"The product has evolved from needs-based reasons" to funding people's wants, says James Mahoney, chief executive officer of Irvine, Calif.-based Financial Freedom Senior Funding Corp., one of the largest U.S. reverse-mortgage purveyors and a unit of IndyMac Bancorp Inc.

With a reverse mortgage, instead of the borrower making payments to the lender, as with a traditional mortgage, the lender makes a payment, or payments, to the borrower. The borrower keeps control of the house and doesn't have to pay back the money as long he or she lives there. When the homeowner dies or moves out, the house is sold, the loan is paid off, and any money left over goes to the owner or the estate.

There's no way to put a number on how many people are using such loans for luxury items, because no one tracks the use of proceeds. But the number of federally insured reverse mortgages made in the fiscal year that ended Sept. 30 doubled to about 38,000, worth about $6 billion, from a year earlier - and represented nearly one-third of all reverse mortgages made since 1989, according to federal housing data. That figure, though, still represents less than 1 percent of mortgages issued over that period.

If your are interested in seeing the payout you could receive from a reverse mortgage please call us toll free at 1-888-973-8377 or visit our online free analysis form at:
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