Reverse Mortgages. Are they for you?

It is thought that since the “baby boomers” are reaching retirement that there will be a huge demand for Reverse Mortgages. The baby boomers are generally referred to the baby’s that were born between 1946 and 1964.

Let's start by saying that you should always consult with your family attorney or financial advisor before entering into a Reverse Mortgage. Your home is a valuable asset and knowing your rights and responsibilities as a borrower may help minimize any financial risks you may face.

In order to qualify for a RM (reverse mortgage) you must first own your home outright (or minimal balance), all owners must be at least 62 years of age and you must live in your home.

The loan proceeds can be paid to you in monthly advances, through a line-of-credit, a lump sum payment or a combination of all three options. The amount that you can borrower generally is based on your age, the equity in your home and the interest rate the lender is offering. Sine you still own the home you will still be responsible for the taxes, repairs and maintenance.

You are protected under the Federal Truth in Lending Act (TILA), which requires your lender to inform you about the plan’s terms and costs. Be sure that you understand them before you sign anything. Lenders must provide specific information on rates and payment terms.

Key Point to Remember

(1) Your legal obligation to pay back the loan is limited by the value of your home at the time you pay off the loan, (2) You can never owe more than the home is worth, (3) The loan proceeds are not taxable, (4) If you receive Social Security Income the advances will not affect your benefits as long as you spend them within the month you receive them.

When in doubt, check with a benefits specialist at a local agency or legal services office. Another good source of information is AARP. You can write them at:

AARP Home Equity Information Center
601 E. Street, NW
Washington, DC 20049 or visit their website at http://www.aarp.org/