‘It doesn't cost us anything'
Reverse mortgage is an option for those 62 and over
As they faced pending repair bills at their south Kansas City home, retirees Boyce and Verne Carson were stretching to pay credit card debt and prescription drug costs.
“There are so many things you have to do to keep up a house,” said Verne, 65. “It just doesn't do it on Social Security.”
The Carsons' solution was to take out a reverse mortgage on their house last year.
“As long as my wife and I live here, it doesn't cost us anything, and it frees up extra money,” said Boyce, 73. “It also freed up enough money to put in a new driveway, which we needed badly.”
A reverse mortgage is a loan that enables homeowners who are 62 and older to borrow against the equity in their home, without having to sell the home, give up the title or take on a new monthly mortgage payment.
The loan amount depends on the borrower's age, current interest rates and the value and location of the home. The loan proceeds can be used for any purpose and can be taken out as a lump sum, fixed monthly payment, line of credit (except in Texas) or a combination.
“The reverse mortgage is uniquely designed to impact the elderly homeowner's ability to maintain their standard of living in their own home,” said Robert Evans Jr., a vice president with James B. Nutter & Co. Mortgage Bankers, which handled the Carsons' reverse mortgage.
“It just makes you feel like you don't have to worry any more,” Verne Carson said.
Evans said reverse mortgages are not well-suited for short-term borrowing, because a short-term borrower could get a line of credit at a bank at a much lower cost.
“This is for people who want to stay in their own home and want to use this money for short-term, intermediary and long-term financial needs,” he said.
As with other loans, a reverse mortgage loan accumulates interest and fees until it is paid off.
A reverse mortgage does not have to be repaid until the borrower or borrowers move out of the home permanently. The loan typically is paid off with the proceeds from the sale of the home. The repayment amount cannot exceed the value of the home.
“For many people who are looking for a way to solve financial issues, a reverse mortgage can be good option for them,” said Natalie Kaibel, a reverse mortgage counselor with the Consumer Credit Counseling Service in Independence.
HUD requires potential borrowers to receive counseling from a HUD-approved housing counselor before closing on the loan. Evans said Nutter encourages potential borrowers to include friends, family members, bankers and attorneys in the decision-making process.
“The communication process of credible information that they can have confidence in is enhanced by broadening the spectrum of who they want to include in this,” Evans said.
Source: Kansas City Star
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