ARTICLES / General /
Thinking About Reverse Mortgage /
Other Articlesby Cheryl Ellis, Staff Writer
Individuals who live in their home, and have no
or a very low mortgage balance, may find that a
reverse mortgage will supplement income when
needed. While the borrower must be 62
years of age or older, caregivers who retain
durable power of attorney can investigate this
type of loan to help their loved ones.
The uses
for the funds are up to the borrower. Payments can
be received lump sum or through a variety of other
methods such as equal monthly payments; any extras can
be retained in an interest bearing account. Money
market mutual funds, which are considered the “least
volatile,” will allow checks to be written when
necessary. Taxes on the home can be pulled
from this type of saving from a reverse mortgage.
Because it bears interest, there may even be a little
left over to keep the account afloat for the following
year, or for other expenses.
A
financial advisor or a CPA should be consulted if the
amount selected is in excess of what is immediately
needed. Consult with one before signing a reverse
mortgage note, and know where the mortgage company will
be sending the funds. AARP cautions individuals
who are approached by “lenders” who offer to “invest”
their money.
Caregivers needing to make improvements on a loved one’s
home for safety reasons can utilize the funds from a
reverse mortgage to cover the bill. The current
appraised value of the home and any limits on lending
for the geographic area determine the amount available
for lending.
There
are costs involved with reverse mortgages, but you
cannot owe more than your home’s value. Going
through a HUD approved counseling agency will help in
finding if the costs and process will be a positive
move. They can be reached toll free at
1-800-569-4287.
The
common misconception is that a reverse mortgage will pay
you money for your home and then “take it away” when the
borrower dies. Many folks worry that their home’s
current value will be given to them, and when it
appreciates, the lender will take that money, too.
This is not correct.
However,
there are charges and interest involved with reverse
mortgages, and they can consume the additional funds
should the home be sold. The area the home is in
may undergo only a modest appreciation by the time it is
sold, and simply meet the amount to be paid back.
So while you will not owe more than your home is worth,
any loan requires interest to be paid. AARP has a
reverse mortgage education program and can be reached at
1-800-209-8085.
Evaluating your needs as well as your loved one’s is
important when considering a reverse mortgage option.
Many caregivers must take time from work or alter their
work availability to care for loved ones. Rather
than pull money from your own income, consider utilizing
this alternative source of income. If you have to
make up the difference so that medications or other
costs can be met, this will alleviate financial
drainage. It’s important to remember that should
you stop covering for these expenses that you budget
appropriately when you regain your income.
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