Tuesday, December 10, 2013
By JIM MILLER
DEAR SAVVY SENIOR: Where can I get reliable, unbiased information on reverse mortgages? My wife and I are thinking about getting one but want to do some research first. -- Need Money
DEAR NEED: For seniors that are house rich but cash poor, a reverse mortgage is a viable option, but there's a lot to know and consider to be sure it's a good choice for you. Here are some tips and tools to help you research this complex financial product.
Let's start with a quick review. A reverse mortgage is a loan that lets older homeowners convert part of the equity in their home into cash that doesn't have to be paid back as long as they live there.
To be eligible you must be age 62 or older, own your home (or owe only a small balance) and currently be living there.
You can receive the cash either as a lump sum, a line of credit, regular monthly checks or a combination of these. And with a reverse mortgage, you, not the bank, own the house, so you're still responsible for property taxes, insurance and repairs.
Currently, 99 percent of all reverse mortgages offered today are Home Equity Conversion Mortgages, which are backed by the Federal Housing Administration.
Repayment is due when you or the last borrower dies, sells the place or lives elsewhere for 12 months. Then you or your heirs will have to pay off the loan (which includes the money you borrowed plus accrued interest and fees) either with the proceeds from selling the place or, if you want to keep the house, with money from another source.
To get a better handle on reverse mortgages and how they work, there are several excellent resources you can turn to for reliable information, but you're going to need access to the Internet utilize them.
To get started, the National Council on Aging recently created a free new website called the Home Equity Advisor that's designed to help you think through the best way to leverage your home -- a reverse mortgage isn't your only option.
Simply go to homeequityadvisor.org and click on the "Quick Check" tool, which will ask you a series of questions about your personal and household situation in order to define exactly what you might need or want. Then, based on your answers, you'll receive an individualized report offering information, tools and consumer advice on a range of possible solutions that includes reverse mortgages.
If you find that you are a good candidate for a reverse mortgage, your next stop is at reversemortgage.org, a new consumer website created by the National Reverse Mortgage Lenders Association.
This site offers lots of educational information including "Your Road Map," which will help guide you through all the features of reverse mortgages and the process of obtaining one.
It also has a calculator to estimate how much you'd be eligible to receive from a reverse mortgage and offers has a comprehensive directory of licensed HUD-approved mortgage lenders, banks and credit unions that offer reverse mortgage loans in your state.
Another important resource to help you understand the pros and cons of a reverse mortgage and how it would work in your particular situation is through counseling.
In fact, because reverse mortgages are such complicated products, the federal government requires that all reverse mortgage borrowers receive counseling through a HUD approved independent counseling agency before they take out a HECM loan.
Counseling can be done in person or over the phone and some agencies provide it for free or at a minimal fee. Some locations charge around $125.
To locate counseling agencies in your area, visit hud.gov/offices/hsg/sfh/hecm/hecmhome.cfm or call (800) 569-4287.
Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org. Jim Miller is a contributor to the NBC Today show and author of "The Savvy Senior" book.