Cash Poor? House Rich?

Article submitted by Dennis Schwab, V.P., Bank of Choice. He can be reached at 303-463-3849.

Real estate values have soared in the last 10 years, but so have taxes, health expenses, and utility costs. While reverse mortgages have been around for a while, they are growing in popularity. Many retirees have a lot of equity in their homes and are faced with a rising cost of living and an income that doesn't quite keep up.

Seniors 62 and older, are intrigued by the thought of eliminating any remaining 1st mortgage payment, and getting some of their equity in the form of a "line of credit" a fixed monthly income, or a lump sum payment - all for NO monthly mortgage payment. This can have a HUGE impact on monthly cash flow when living on a fixed income.

While there used to be considerable misunderstanding regarding reverse mortgages, I think most people are comfortable that reverse mortgage lenders are not going to "take my house." The amount of equity that you can "access" via a reverse mortgage is dependent primarily upon your age, value of the house, and any existing mortgage balance. The calculation for available dollars is always designed to leave some equity in the house so the property can be sold or refinanced when the person in title passes away or moves out.

Seniors may want to consider this financial management tool for one of 3 reasons:

They cannot afford to stay in their house and keep up with all their expenses.
They are making ends meet, but would like a "cushion" in reserve for emergency situations.
They are financially well off, but want to travel more often, or to buy "toys" such as motor homes, boats, nice cars, or just to enjoy their retirement years to the fullest.

Whatever your reason for considering a Reverse Mortgage, educate yourself about how they work and what to expect. Two great sites to visit are: www.reverse.org and www.AARP.org/ revmort, and finally, when it comes time to speak with a mortgage advisor and "get serious," make sure they know what they are doing-reverse mortgages are far different than "forward" mortgages. Just because a lender knows how to arrange a standard "30 year fixed" loan, does not mean they are qualified to arrange a complicated reverse mortgage.