Aging in Place with Reverse Mortgage
Wealth is the ability to fully experience life.
~ Henry David Thoreau
Aging in Place
I must admit the concept of Reverse Mortgage (RM) has been a bit confusing to me over the years. I have attempted on multiple occasions to write about the topic, but in the early days the RM industry was plagued with negative press, and I avoided it.
Having noted this, I also felt the RM offering had the potential to allow certain categories of individuals the ability to successfully age in place. For example, it made sense for some groups who were House-Rich (built up equity over the years) on paper but struggling with limited income day-to-day. Another group were solo agers with no extended family to leave assets to when they pass. These two groups make up a large and growing segment of the demographic transition.
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Per the data in the report, which cites the U.S. Census Bureau, there are approximately 22.1 million solo agers in America — 28% of older adults.
MATHER INSTITUTE REPORT DETAILS UNIQUE RISKS FOR ‘SOLO AGERS’
January 17, 2024, mather.com
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The RM in theory could potentially be a game changer for these groups, as well as others. So, when I received a message through my aginginplace.com contact page from Dan Clark, a Reverse Mortgage Professional in my area, I gave him a call. I wanted to know about him, the state of the industry, and a success story he has been involved with.
After talking to Dan and getting a good feeling about him and his mission, I requested he write a brief introduction and outline about the process requirements. I have no business ties with Dan and I am posting only in the spirit of helping those who might be interested in a RM. Below is Dan’s article.
Reverse Mortgage
My name is Dan Clark and I have been specializing in reverse mortgages for the past 25 years. It is the only mortgage that I work with. I enjoy it so much as I am 78 years old myself and so I am talking with my age mates. My wife and I have had a reverse mortgage for the past 7 years and so have not had a mortgage payment during this time.
A reverse mortgage is an FHA product. They set standardized rules so that all lenders follow their guidelines. Here are the basic requirements for borrowers:
- you are a homeowner 62 years of age or older
- you own your home outright or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan
- you have the financial resources to pay ongoing property charges including taxes and insurance
- you must live in the home.
When you get a reverse mortgage, the ownership stays with you and your heirs inherit the ownership once you pass on. FHA has designed the loan so that the amount that you owe should not be more than the value of your home at the end of the loan. You make no mortgage payments on the loan for as long as you have it in good standing.
A reverse mortgage is a tool and like all tools should be used for good purposes. Examples of a good use are to help pay property taxes, enable you to live within your budget, help with medical expenses and help your family with their finances.
A reverse mortgage is a negatively amortizing loan, which means that every year the amount that you owe will increase. You must measure this against the increase in the value of your home to see if it is a good investment. Most borrowers will see that their equity increases for some years as the amount of the loan increase is less than the increase in the value of their home.
Funds from your reverse mortgage will be used to pay off your current mortgage, so your available cash to pay expenses will increase by the amount that you would have had to spend to pay the monthly mortgage. Borrowers that have good equity will also receive a credit line. Moneys taken from the credit line do not have to be paid back until the end of the loan. The loan period is the lifetime of the borrower.
As a senior myself, I enjoy talking with other seniors. We all appreciate remembering the decades of our past experience. For more information about myself and information about reverse mortgages I invite you to visit me at www.elderloan.com
I would very much like to talk with you, contact me any time,
Dan
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