Switching Gears: Reverse Mortgages Offer Unique Way
to Retire with Extra Income
Your home has given you a lot -
with RM, it can give you even more
By Robert Valentine,
Certified Senior Advisor
September 8, 2006 - Dorothy, the main character of
the movie, The Wizard of Oz, once exclaimed, “There’s no place like
home!” Even in a world much different than the one that existed when The
Wizard of Oz was filmed, that old adage still holds true. If you’ve
lived in a home even for a short amount of time, it’s probably filled
with memories that will always be with you. Your walls are filled with
pride and covered in photographs which document life’s many
accomplishments. All of these memories, the good and the bad, come
together to form your home. The place you’ve lived, and maybe even
raised a family in, has given you a lot over the years, and with reverse
mortgages, it can give you even more.
As many Americans plan for retirement and turn to alternative sources of
post work income, one that may come to mind is a reverse mortgage. The
concept of a reverse mortgage is rather simple: someone pays you, based
on the value of your home. There are many options available as to how
you wish to receive this money. You may choose to take monthly payments,
take a lump sum, or receive a line of credit.
When you purchased your home you probably had to
make mortgage payments. As you did, you gradually decreased the amount
of debt owed and gradually increased the amount of equity in your home.
Reverse mortgages are the opposite. As time goes by, you gradually
receive more and more money from the lending company. Thus, your debt
increases and your equity decreases.
The purpose of a reverse mortgage is to have an
added source of income, especially if you plan on selling your home near
the end of your life or after you die. It allows you to receive the
equity from your home and enjoy it in retirement.
The amount you receive in the reverse mortgage is
based on the value of your home, current interest rates, and your
current age. Once you’ve received the amount your home has been
determined to be worth, less any fees charged by the lender, you then
owe that amount to the lender.
You can pay that back any way you wish, but in many
cases, the idea is to sell your home and repay the debt. Often, this is
done by an estate after a person passes away and still has debt. As long
as you’re permanently living in your home, you don’t have to pay the
lender back.
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Reverse Mortgage Program May Get New Enhancements
House bill would
allow seniors to access greater equity amount
April 30, 2006 – The Reverse Mortgage Program,
already popular with senior citizens, may get even better. The U.S.
House of Representatives is considering legislation that would make
substantial improvements to the federal reverse mortgage program,
including a plan that would allow older homeowners to access greater
amounts of equity from their homes, according to the National Reverse
Mortgage Lenders Association.
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more...
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Reverse Mortgages |
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Basic Requirements
Reverse mortgages do have a lot of details and can
get complicated, which is why it’s best to ask a financial professional
for advice before looking into them much further. While they may have a
lot of technical details, they don’t have many requirements. In general,
you must be 62 years of age or older, and own your own home. Those are
the two basic requirements of a reverse mortgage. Beyond that, there are
a few other basic things to keep in mind.
Reverse mortgages do have upfront costs, just like
a regular mortgage. They also have monthly service fees. However, all of
the money you receive from the lender is tax-free. To get a better
estimate of how much a reverse mortgage would pay you, it’s wise to meet
with a financial professional.
Unfortunately, reverse mortgages aren’t for
everyone. Reverse mortgages can provide a valuable resource to
individuals when the circumstances are right, but there are many
considerations to be taken before choosing one, including: fees,
restrictions, estate planning considerations, need for income, other
assets, health considerations, insurance coverage, and so on.
Often times a reverse mortgage is a last resort for
income for many individuals and many individuals decide that reverse
mortgages aren’t for them. And in some situations, for instance, if you
want the house to stay in your family for many generations, then it may
not be for you.
There truly is no place like home and the reverse
mortgage reminds us of that. It’s one of the few places on earth that
can be filled with so many memories. So if a reverse mortgage sounds
right for you, contact a financial professional today and discuss your
options for proving the old adage right, “there’s no place like home.”
Note: This article was submitted by Robert
Valentine of Financial and Retirement Management. Robert (CA Insurance
Lic #0C23496) is a Registered Representative of and offers securities
through Securities America, Inc., a Registered Broker/Dealer, Member
NASD/SIPC. Advisory services offered through Financial and Retirement
Management, a Registered Investment Advisory firm. Robert is a Certified
Senior Advisor in Huntington Beach, CA. Several of his articles on
financial planning matters that concern investors have been published.
Robert can be reached at (877) 732-2637.
