Reverse Mortgages – Can You Outlive Them?
By Ken Scholen
Reverse mortgages provide loan advances that don’t have to be repaid until the borrowers die, sell, or move. And many borrowers expect to remain in their homes until they die.
But federal research* has discovered that reverse mortgage borrowers pay back their loans within 6 to 7 years – way earlier than anyone had predicted, and only about half the average borrower’s remaining life expectancy.
No one knows why these borrowers are ending their loans so soon. But the fact that they do so has important implications if you are considering one of these loans. It strongly suggests that the likelihood of your being alive when your loan ends is much greater than you might expect.
So you need to take a hard look at what your financial situation would be if your loan were to end sooner than you expect.
We would all like to live in our homes for as long as possible. But during our 70s in particular the likelihood increases that some event might cause us to sell and move.
For example, declining health, disability, or the death of a spouse. Or you might decide to move closer to family, to a better climate, or to a place where someone else would be responsible for household chores and maintenance.
It is also possible that you may only fully understand the reality of a reverse mortgage’s costs, rising debt, and your declining equity when you see the actual numbers on your monthly statements.
But no matter what might cause you to sell and move sooner than expected, you must plan for that possibility. A reverse mortgage counselor can show you what your projected financial position (amount owed, amount of equity remaining) would be at various future times.
So take a close look at those numbers and ask yourself how you would cope financially if the loan were to end sooner than you expect, or for reasons you might not expect.
And keep in mind that that the less of your equity you spend now via a reverse mortgage, the more you are likely to have in the future when you may need it more.
* “Home Equity Conversion Mortgage Termination,” Cityscape Vol. 9 No. 1, 2007, U. S. Dept. of Housing and Urban Development, Office of Policy Development and Research
http://www.reversemortgagemonitor.org has no ads, no links to lenders, and no ties to lender interests. It provides independent consumer information on reverse mortgages, and is sponsored by the nonprofit National Center for Home Equity Conversion. It analyzes a variety of important topics at http://www.reversemortgagemonitor.org/Analysis.html
Photo by Michael Coté
Related posts:
- San Diego Reverse Mortgage: A Tale of High Values and the Greying of the West By Grant W. Martin The popularity of the reverse mortgage...
Related posts brought to you by Yet Another Related Posts Plugin.
