Why Do Homeowners Get Reverse Mortgages?
April 22nd, 2008
- Free Reverse Mortgage Counseling Available
- Reverse Mortgages & Foreclosure Prevention
- Budgeting for a Reverse Mortgage
- Reverse mortgage technical defaults
- Reverse mortgage counseling fees
Why do people get a reverse mortgage? According to the Consumer Credit Counseling Service of Greater Atlanta, the #1 reason is because the homeowner’s budget is too tight.
It may be that the results of a survey of 213 reverse mortgage borrowers taken by the group apply to Atlanta area but not elsewhere. That said, the results are interesting:
When asked the question, “What prompted you to obtain a reverse mortgage loan?” the responses were:
___Budget too tight — 19%
___Need more liquid assets on hand –- 16%
___Need equity to pay for ordinary expenses –- 15%
___Home repairs and maintenance –- 15%
___Provide care for dependents, pay medical bills –- 8%
___Pay property taxes and homeowner’s insurance –- 7.23%
___Falling behind on monthly payments –- 6.25%
The survey was conducted in January by Consumer Credit Counseling Service of Greater Atlanta, Inc., a credit counseling agency that provides reverse mortgage counseling. The homeowners average 74 years old and have lived in their homes an average of 18.5 years. The average purchase price of their homes was $95,554 and the respondents said that the current value of their homes was approximately $221,997.
“We expect the demand for reverse mortgages to grow significantly as baby boomers reach retirement and need funds to meet daily expenses,” said Sue Hunt, manager of reverse mortgage counseling for CCCS. “It is important for homeowners to educate themselves about reverse mortgages. Credit counseling can help them understand how these loans work.”
While 79.4 percent of the respondents are retired, 10.5 percent work part-time jobs, nearly 5 percent work full-time and another 5 percent said they were looking for a job.
Most reverse mortgage lenders require homeowners to obtain counseling prior to receiving the loan. To qualify for a reverse mortgage, a person should have a significant amount of equity in their home and the home must be in reasonably good condition.
Although income and credit history are not considered in securing a reverse mortgage, CCCS believes it is critical for homeowners to review their entire financial situation during counseling. Reverse mortgage clients need to develop effective budgeting skills to meet periodic expenses, such as property taxes and homeowners insurance.
CCCS of Greater Atlanta serves clients in all 50 states and has 18 offices in four states. It is the headquarters for the CredAbility Network, a family of agencies serving consumers in north Georgia, south Florida, middle Mississippi and east Tennessee as well as nationally via telephone and Internet.
CCCS is accredited by the Council on Accreditation and is a member of the Better Business Bureau and the National Foundation for Credit Counseling (NFCC). Governed by a community–based board of directors, CCCS is funded by creditors, clients, contributors and grants from foundations, businesses and government agencies. Service is available at offices throughout metro–Atlanta and north Georgia in English, Spanish and American Sign Language. CCCS offers around the–clock help by phone at 1–800–251–CCCS or at its Web sites, www.cccsinc.org and cccsenespanol.org.