Reverse Mortgages

Reverse Mortgages and Foreclosures - 6/03/08

INTRO: Many seniors are having trouble making ends meet, and foreclosures are at an all time high. Today, an expert is going to tell us about a little-known strategy which could help you keep your home despite financial trouble.

1. WHAT'S A REVERSE MORTGAGE?

A. A reverse mortgage is a government insured home loan for seniors age 62 or older. You can take a lump sum, or a line of credit which you can draw upon as needed, or monthly income payments.

You are charged interest, but the interest accumulates. You don't have to pay the loan or interest until you sell or permanently leave the home. Only at that time is the loan paid back.

2. WHAT IF YOUR HOME SALE ENDS UP NOT PRODUCING ENOUGH MONEY TO PAY OFF THE REVERSE MORTGAGE PLUS THE INTEREST THAT'S DUE?

A. The United States Housing and Urban Development Department insures reverse mortgages. This means that if the home sale proceeds do not cover the amount owed to the lender, the HUD will pay the difference.

3. CAN WE USE A REVERSE MORTGAGE TO AVOID FORECLOSURE?

A. In many cases, the answer is yes. Let's say you have fallen behind on your mortgage and the bank is threatening foreclosure. Or you might even be in the midst of a foreclosure. A reverse mortgage can be used to pay off your existing traditional mortgage, and you would no longer have to worry about making monthly payments. Recently, I have met with a number of seniors who were in foreclosure or couldn't make their monthly mortgage payments. It was very rewarding to see their burden begin to lift as I explained that a reverse mortgage might solve their problems.

4. BUT IF YOU'RE ALREADY FACING FORECLOSURE, YOUR CREDIT MAY BE BAD. WOULDN'T THAT AFFECT YOUR ABILITY TO GET A REVERSE MORTGAGE?

A. No. There are no income or credit score requirements to get a reverse mortgage. Your loan will be based on your age, property value, and current interest rates.

5. OTHER THAN BAILING OUT A FORECLOSURE, WHAT ELSE COULD WE USE A REVERSE MORTGAGE FOR?

A. Most people that I have done reverse mortgages for have used the proceeds to pay off monthly bills like mortgages, lines of credit and of course credit cards. By eliminating the monthly payment, there is money available for necessities like living more comfortably, gas, food, and prescriptions.

B. One person I worked with used the proceeds from a reverse mortgage to have needed repairs done on her home. She had the repairs and remodeling done at the start, and then chose to receive a monthly installment from the reverse mortgage to help her live more comfortably.

C. I think that we can all relate to large unforeseen expenses such as home repairs and family or financial emergencies. A number of seniors that we have met use the proceeds of a reverse mortgage as an emergency fund for unforeseen expenses such as roofs, taxes and other household maintenance and general upkeep.

6. AND YOU MIGHT TAP INTO A REVERSE MORTGAGE JUST TO GIVE YOU MORE INCOME TO ENJOY RETIREMENT?

A. Yes.

CLOSE: Could a reverse mortgage lighten your financial burdens? Avoid foreclosure? Or just enhance retirement? Give