Make us your home page

Reverse mortgage can provide a valuable option

Reverse mortgages allow people 62 or older to borrow against their home equity. But these arrangements are not to be entered into unadvisedly or lightly, because reverse mortgages are actual loans that must be repaid in full — when you move, when you sell your house or upon your death, rather than in monthly installments.

But, said David Certner, AARP's legislative-policy director, it's something to consider "if you want to remain in your current home and don't have other options."

"If the one asset you have is your home, a reverse mortgage will let you turn it into a payment stream," Certner said. "Maybe you simply need a home-equity loan, or to sell the home and move to something smaller. For a lot of people who want to stay in their own homes, the reverse mortgage is one way to help accomplish that."

Though home values have dropped steeply since the real estate bubble burst in 2006, many older Americans have owned their houses for decades and have vast amounts of equity to tap.

Yet of the millions of home loans originated between 1990 and 2010, just 660,000 were reverse mortgages, AARP says.

Why? Because reverse mortgages can be complicated, sometimes pricey affairs compared with the financial alternatives.

There are three kinds of reverse mortgages, but the lion's share — 95 percent — are home equity conversion mortgages insured by the Federal Housing Administration.

They cost more than traditional mortgages. They have no income or medical requirements, and the cash can be used for any purpose, such as medical bills.

The older you are, and the more equity you have in your house, the more you can borrow. To qualify, borrowers must own their properties outright or have small mortgage balances; occupy the properties as principal residences; and not be delinquent on any federal debts, such as income taxes.

Advantages to reverse mortgages include:

• How you get the money is your choice: in fixed monthly payments, a lump sum, a credit line or a combination of the three.

• Even if you receive more in payments than your home is worth, you will never owe more than the home's value.

• You retain title to your home.

Among the disadvantages:

• Lenders, who must be FHA-approved, may charge servicing fees during the loan's term.

• Loans may carry variable interest rates tied to short-term indexes, although the AARP says more than 70 percent now have fixed interest rates.

• If interest rates are fixed, you must borrow the maximum amount against your home's equity.

• Refinancing your existing mortgage or taking out a home-equity loan or line of credit may be a less expensive alternative to a reverse mortgage, which can have substantial upfront fees.

Reverse mortgage can provide a valuable option 06/02/11 [Last modified: Thursday, June 2, 2011 9:39pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Philadelphia Inquirer.

Join the discussion: Click to view comments, add yours

  1. 'Road to Nowhere' is back: Next phase of Suncoast Parkway coming


    Despite intense public opposition and dubious traffic projections, the Florida Department of Transportation has announced that construction of the toll road known as "Suncoast 2" is expected to start in early 2018.

    The Suncoast Parkway ends at U.S. 98 just south of Citrus County. For years residents have opposed extending the toll road, a project dubbed the "Suncoast 2" into Citrus County. But state officials recently announced that the Suncoast 2 should start construction in early 2018. [Stephen J. Coddington  |  TIMES]
  2. A sports rout on Wall Street


    NEW YORK — Sporting goods retailers can't shake their losing streak.

  3. Grocery chain Aldi hosting hiring event in Brandon Aug. 24


    BRANDON — German grocery chain Aldi is holding a hiring event for its Brandon store Aug. 24. It is looking to fill store associate, shift manager and manager trainee positions.

  4. Lightning owner Jeff Vinik backs film company pursuing global blockbusters


    TAMPA — Jeff Vinik's latest investment might be coming to a theater near you.

    Jeff Vinik, Tampa Bay Lightning owner, invested in a new movie company looking to appeal to a global audience. | [Times file photo]
  5. Trigaux: Look to new Inc. 5000 rankings for Tampa Bay's future heavyweights


    There's a whole lotta fast-growing private companies here in Tampa Bay. Odds are good you have not heard of most of them.


    Kyle Taylor, CEO and founder of The Penny Hoarder, fills a glass for his employees this past Wednesday as the young St. Petersburg personal advice business celebrates its landing at No. 25 on the 2017 Inc. 5000 list of the fastest growing private companies in the country. Taylor, still in his 20s, wins kudos from executive editor Alexis Grant for keeping the firm's culture innovative. The business ranked No. 32 last year. [DIRK SHADD   |   Times]