REVERSE MORTGAGE. IS IT RIGHT FOR YOU OR YOUR PARENTS/GRANDPARENTS?
Imagine getting paid for owning a home.
That's what happens with a reverse mortgage, which pays debt-free
homeowners, ages 62 and over, a monthly amount that is often several
times larger than their Social Security earnings, for life.
"It's a loan, but you don't have to pay it back until you're six feet
under — and who cares then?" said Mark Reilly, reverse-mortgage
specialist at Cardinal Financial Co. near Philadelphia.
Count Marion Muller among the believers. The Warminster, Pa., homemaker
retired to Daytona Beach, Fla., in the 1970s. But after a decade as a
widow, she found her independent lifestyle threatened by mounting bills.
"My roof and windows needed repair. And the 20-year-old car was falling
apart. I don't think I would have been able to hold on," she said.
Her daughter suggested a reverse mortgage. Armed with a new line of
credit, Muller hired contractors, bought a new car and was able to stay
in her home — without having to make any payments. "I like to be
independent. I like to be by myself. And I like the warmer weather," she
said.
The American Bar Association compares a reverse mortgage to a home
equity loan, with this difference: Instead of getting the money up front
and paying back slowly, the borrower typically gets the money, tax-free,
in installments or a line of credit, leaving heirs to repay the loan in
a lump sum when the house is sold.
In most cases, the debt is limited to the value of the house. But the
American Association of Retired Persons warns borrowers to read
agreements carefully — because prices as well as features can vary
greatly.
Maximum payments vary, depending on the loan program, the borrower's
age, the home's value and market interest rates. One 88-year-old widow
in a $200,000 home collects about $1,400 monthly, according to Reilly.
Younger borrowers and more modest homes typically get smaller payments.
Those payments, plus interest currently averaging around 6 percent, plus
points, plus insurance charges, will be repaid by the borrower's heirs
when they sell the home after she dies.
"It's really helpful," Reilly said, "for a lot of folks who are up there
in years and who want to put steak on the table instead of a bowl of
cereal."
For more info, call Cathy or Vic at Zeman Mortgage, Inc.
