Reverse Mortgages Expected To Help Boomers
Retire
by N.Sioris
Reverse mortgages are becoming popular financial planning tools
for seniors in retirement. When Social Security was first
implemented in 1935 the average life expectancy was 65 years.
Today people are living healthier lifestyles and with improved
medical technology we are living far longer than Franklin D.
Roosevelt ever imagined. This is a sort of good news/bad news
statistic. One of the greatest fears for older Americans is
that they will outlive their assets. Even if you thought you
adequately funded your retirement when you first retired, you
may live so long that you will run out of funds to support
yourself. The fear of insolvency will increase as life
expectancies continue to climb and Social Security and Medicare
become more tenuous. The enormous pressure that will be put on
these entitlement programs when 78 million baby boomers begin
to retire in the next couple of years, is almost incalculable.
One thing for certain, is that we are all going to have to take
steps to be personally responsible for funding a greater
portion of our own retirement and health care than we might
have predicted.
One funding source that has been gaining in popularity in
recent years is the reverse mortgage. A reverse mortgage is a
special type of loan that allows a senior homeowner (62 or
older) to convert part of the equity in their home into
tax-free cash that can be used for any purpose. There are no
payments made by the borrower during the life of the loan and
the loan only becomes repayable when the homeowner permanently
leaves the home. The homeowner does not have to own the house
free and clear, but if there is an existing mortgage on the
home, it will be paid off with the proceeds from the reverse
mortgage. Whatever remaining equity is left can be distributed
in several different ways to the homeowner. The most popular
forms of receiving the excess proceeds are either as a lump sum
or as monthly tenure payments to the homeowner for as long as
they live in the home.
Housing wealth has soared during the last five years in most
areas of the country. However, the savings rate during that
same period of time has declined. Combine that with the severe
losses that many people suffered in the early 2000's in the
stock market and you can easily see that the obvious choice for
many people that need to supplement their income is to tap into
the equity in their homes. Many retirees are finding that they
are "house rich and cash poor."
Reverse mortgages are becoming more mainstream and originations
of these mortgage instruments has nearly doubled in the last
year, according to the National Reverse Mortgage Lenders
Association. New and more innovative reverse mortgage products
are on the horizon as lenders scramble to fill the needs for
higher loan limits and more flexible products. As more reverse
mortgage products become available in the market place, some
are predicting that costs for these loans may decrease.
The high costs associated with reverse mortgages seems to be
one of the biggest arguments against taking out a reverse
mortgage. However, one must keep in mind that the cost of
selling a home, which might include major repairs in addition
to the real estate commission and closing costs, will almost
always be greater than the cost of staying in the home and
obtaining a life time stream of income for as long as you
remain in the home. Additionally, it should be noted that the
closing costs are not an out of pocket expense, the costs are
financed into the loan, and not paid until the loan is paid off
at the time the homeowner permanently leaves the home.
Educating yourself or a family member about a reverse mortgage
is the only way to truly find out if a reverse mortgage is
right for you or a loved one. Every senior that wants to apply
for a reverse mortgage must go through a no cost HUD counseling
class to be sure that they completely understand how the
reverse mortgage works and what other alternatives might be
available to them. Many safeguards have been implemented by the
government, since the first reverse mortgages were introduced
in the 1980's. Today's reverse mortgages are safe and offer
independence and enhanced lifestyles to many "house rich and
cash poor" senior homeowners. In depth information on reverse
mortgages can be found at http://www.letyourhomepayyou.com
About the Author: N.Sioris is a senior reverse
mortgage specialist and the administrator of the reverse
mortgage informational website called, Let Your Home Pay You.com
1-888-269-1098
Article Source: EasyArticles.com
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