Are You House Rich and Cash Poor? A Reverse Mortgage Could Help

It’s tough to watch your retirement portfolio shrink, especially if you were counting on that money soon. Like many Americans, you may be forced to completely change your plans for retirement and find a new source of income. A reverse mortgage is one way to bring in some extra money and stay in your home.

The volume of reverse mortgages rose 24% in March from the previous month, according the federal government. That’s partly because so many homeowners are house rich and cash poor.

Due to the struggling housing market, many people who’ve built up a lot of equity in their homes are unable to sell. That means that people who may have already retired or may have lost their job are unable to move to a less expensive home or may be facing foreclosure. Homeowners who live in expensive housing markets also may be struggling with paying high taxes.

A reverse mortgage loan:
—Could give you a lump sum or line of credit to help with your household expenses
—Could allow you to keep the title to your home
—Would not require repayment until you move or die
—Could help you avoid relying on Medicaid, possibly resulting in a lien on your home, according to the New York Times
—Can be used for any purpose.

The amount of loan you receive would be based upon your age, the value of your home, and current interest rates. Based on 2009 figures, a 70-year-old with a $200,000 home in Westchester County, N.Y., would be able to receive a maximum loan of $110,723, according to Elder Law Answers. If you receive a line of credit you won’t pay interest on the unused portion of the loan.

Reverse mortgages do come with higher fees than conventional mortgages. In many cases, you’ll end up paying twice the closing costs on a reverse mortgage. The loan payments could also affect the amount of government benefits you receive. However, the payments aren’t usually treated as income if they are spent during the same month in which you receive them.

This entry was posted on Friday, May 15th, 2009 at 1:47 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.