May
07

Reverse Mortgages at a Younger Age?

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Once associated with homeowners in their 70s, a new report shows reverse mortgages are now being taken out by people nearing retirement.  While this may seem like a good idea to help pay off debts and remain solvent, consumer advocates warn of the consequences of exhausting their assets early.

 The reverse mortgage allows homeowners 62 and older to borrow against the equity of their home and continue to live in them without having to make payments, as long as the home remains their primary residence.  Interest is added to the loan balance which must be repaid after the borrower moves out or dies.  The borrower must keep current with property taxes and insurance.

 In a report released last month by Met Life Mature Market Institute and the National Council on Aging showed that:

  • Homeowners aged 62 to 64 are far more likely to take out a reverse mortgage than they were in 1999, even though they are borrowing less.
  • The average age of borrowers who took the federally required reverse mortgage counseling was 71.5, down from 76 in 2000 and nearly 77 in 1990.
  • Two-thirds of homeowners seeking reverse mortgages to lower debt levels.

 The majority of reverse mortgages come through the Department of Housing and Urban Development and are guaranteed by the Federal Housing Administration through a program called Home Equity Conversion Mortgages.

 Some experts caution retirees against reverse mortgages especially early in their retirement because they run the risk of depleting their equity in their most important asset.  Homeowners at or near retirement should work with a financial planner or estate lawyer to make sure their plan is clear for the next 20 years of living expenses.

This article is for information purposes only.  It is not intended to be legal, financial or tax advice by the Real Estate Geezer.  Always seek the advice of a competent legal, financial and/or tax professional.

Based on New York Times article

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