Homeowners need reverse mortgages to pay for everyday expenses MortgagePress.comBudget too tight, Need more liquid assets on hand, Home repairs and maintenance
A survey of 213 homeowners who have received reverse mortgage
loans found that the number one reason for the loan is to pay for
daily living expenses. Only three percent say they used the funds
from a reverse mortgage loan to take a vacation.
The survey was conducted in January by Consumer Credit Counseling Service of
Greater Atlanta Inc. (CCCS), a credit counseling agency that
provides reverse mortgage counseling. The homeowners average 74
years of age and have lived in their homes an average of 18.5
years. The average purchase price of their homes was $95,554, and
the respondents said that the current value of their homes was
approximately $221,997.
When asked the question, "What prompted you to obtain a reverse
mortgage loan?" the responses were:
•Budget too tight: 19 percent
•Need more liquid assets on hand: 16 percent
•Need equity to pay for ordinary expenses: 15 percent
•Home repairs and maintenance: 15 percent
•Provide care for dependents/pay medical bills: eight
percent
•Pay property taxes and homeowners insurance: 7.23
percent
•Falling behind on monthly payments: 6.25 percent
A person must be 62 years of age or older to be eligible for a
reverse mortgage. A reverse mortgage is a loan that allows
homeowners to convert the equity in their homes into tax-free
income without having to sell the home, give up the title, or take
on a new or additional monthly payment. Loans must be repaid when
the homeowner no longer lives in the home.
"We expect the demand for reverse mortgages to grow
significantly as baby boomers reach retirement and need funds to
meet daily expenses," said Sue Hunt, manager of reverse mortgage
counseling for CCCS. "It is important for homeowners to educate
themselves about reverse mortgages. Credit counseling can help them
understand how these loans work."
While 79.4 percent of the respondents are retired, 10.5 percent
work part-time jobs, nearly five percent work full-time and another
five percent said they were looking for a job. Most reverse
mortgage lenders require homeowners to obtain counseling prior to
receiving the loan. To qualify for a reverse mortgage, a person
should have a significant amount of equity in their home and the
home must be in reasonably good condition.
Although income and credit history are not considered in
securing a reverse mortgage, CCCS believes it is critical for
homeowners to review their entire financial situation during
counseling. Reverse mortgage clients need to develop effective
budgeting skills to meet periodic expenses, such as property taxes
and homeowners insurance.
For more information, visit www.cccsinc.org.
