You've worked hard all your life and
planned on enjoying your retirement years. You face an uncertain
future because of debt, however. It could be credit card debt. It
could be unexpected medical expenses. Your Social Security, savings,
and pension won't meet your expenses. If you own your own home and
are 62 or older, a reverse mortgage may be the answer for your situation,
although it isn't for everyone. You would never be forced to move
or sell your home to pay the loan, and you would still have equity
to pass to your heirs.
Under a reverse mortgage, instead
of making payments to a lender, payments would be made to you, based
on the equity in your home. You would not need to make repayments
as long as you live in your home; nobody could force you to. When
your home would be sold, either while you are alive or after your
death, the lender would be paid back, plus interest. You or your
survivors would receive any remaining equity. If the proceeds would
not cover your debt, the remaining balance would be paid by the
U.S. Department of Housing and Urban Development (HUD).
Reverse mortgages are federally insured
private loans that are insured by HUD. Seniors often use money from
reverse mortgages to supplement Social Security, make home improvements,
meet unexpected medical expenses, and for other reasons.
To qualify, you must be 62, own your
home outright, or have a low mortgage balance that you can pay off
at closing with proceeds from the reverse mortgage, and must live
in the home. You may have a single family dwelling or two-to-four
unit dwelling that you own and occupy. Detached homes, some mobile
homes, and condominiums qualify. Your home must be in reasonable
condition and meet HUD standards. If you want more information,
you can go to HUD's website online or call the Housing Counseling
Clearinghouse at 1-800-569-4287.
If you might be thinking of using
the money to pay credit card or other debt, you should know the
differences between a reverse mortgage and a home equity line of
credit. Under a home equity line of credit you would have to qualify
for the loan and make monthly payments. Under a reverse mortgage,
you would be paid, regardless of your current income. The amount
you can borrow depends on your age, the value of the house, the
current interest rate, and other loan fees. The older you are, the
lower the interest rate, and the more valuable your home, the more
you can borrow.
