When you’re retiring, the costs of living may be taken from this strategy.
If you’re at least 62 and in need of immediate finances, you may want to consider reverse mortgages. Those who are single or widowed, with personal money management skills, and does not have anyone depending on him or her for a place where they live (or does not have any plans of passing the house’s ownership to his or her children), then you can surely qualify. But bear in mind that your home must have enough equity to satisfy the loan.
Recently, the Los Angeles Times reported a rise in reverse mortgage insurance by the government. It states, “The Federal Housing Administration insured 11,261 reverse mortgages in March, a jump of 17 percent from the same month last year. Experts say the loans — which are only available to those over age 62 — are on the rise for several reasons, including provisions in the federal stimulus package that have made them cheaper and easier to obtain. Increasingly, lenders say, even well-off seniors are relying on the loans to provide monthly spending money at a time when their retirement accounts and other income may be limited.”
If this is so, then these seniors may be in great danger. When the Economic Stimulus package has increased the maximum amount that can be received to $625,500 from $217,000 (depending on the location), many were easily attracted to reverse mortgages. The money that they can receive must be allotted for their medical expenses or any other immediate purchases except for vacation sprees, luxury purchases and other unnecessary purchases.
Here’s a funny ad on the consequences of poor reverse mortgage usage in Jack Bauer style:
Remember, should you fail to make the right choice, you’d still have to pay your own property taxes. When the homeowner dies, the house will be sequestered by the lender and those left in the residence will have no choice but to move out.