February 19, 2007
LIFE JUST KEEPS GETTING EASIER:
Reverse mortgages have gotten even better (TERRY SAVAGE, 2/19/07, Chicago Sun-Times)
There's good news for seniors who own their homes, and want to continue living in them in spite of higher property taxes, utility bills and other costs. Reverse mortgages, which allow seniors to turn their home equity into a tax-free monthly pension check, have become more attractive. Competition means there are better deals and lower rates.Posted by Orrin Judd at February 19, 2007 8:53 AMFirst, a reminder of how reverse mortgages work. Any senior age 62 or older who has a fully paid mortgage, or only a small balance remaining, can obtain a reverse mortgage -- a withdrawal of the equity in their home, on a tax-free basis.
This is a scary concept for the frugal seniors who have spent a lifetime paying down the mortgage, and don't want to be in debt. They worry about the possibility of losing their home. But let me stress that reverse mortgages enable you to remain in control of your property, and permit you to sell at any time.
Your home is your home
The loan is only repaid when you sell, move out, or die. And no matter how long you live, you can't be forced out of your home.
Take a deep breath. Here's how it works.
Why do I smell snake oil ... ?
Posted by: erp at February 19, 2007 11:38 AMerp,
I hear there are nasty fees for withdrawal on this. Watch those fees.
Posted by: Brad S at February 19, 2007 11:58 AMerp,
I hear there are nasty fees for withdrawal on this. Watch those fees.
Posted by: Brad S at February 19, 2007 11:58 AMNot snake oil, financial innovation. It is too common to see eldery folks around here (New England) living in $400K+ houses with no mortgages living on mac and cheese. It is only a problem for the kids as they will inherit less.
Posted by: aww at February 19, 2007 12:03 PMThis "innovation" has been around for a long time.
Northern geezers may be living on mac and cheese because it's too cold to go out to the store, it's too dangerous to drive in snow and ice, they've lost interest in cooking, shopping, etc. than their finances -- unless of course, it's the taxes that are killing them.
Down here in the sun, we're more motivated to get out and get our good nutrition at the local eateries. Cooking is really only a sometime thing.
Real estate isn't that much cheaper here anymore, although you can still buy a decent house on a small lot for about $200,000. Taxes which used to be so low, they were negligible, have been steadily rising, ours skyrocketing even higher than our property values, but unlike property values, our taxes aren't collapsing nor are they ever likely to.
Erp - perhaps my illustration was a bit off. My point was that there are a sizable number of older couples who are living month to month while they have a bunch of equity stored up in their house. Downsizing is one way to take the equity out. A reverse mortgage, if done correctly, is the second.
Posted by: AWW at February 19, 2007 3:20 PMAWW, You are quite correct, but people stay in the old house for reasons other that economny. Many in my generation and those older than I are fearful of the unknown. The generations coming after us will be far more savvy and adventurous.
Posted by: erp at February 19, 2007 5:38 PMAWW, You are quite correct, but people stay in the old house for reasons other that economny. Many in my generation and those older than I are fearful of the unknown. The generations coming after us will be far more savvy and adventurous.
Posted by: erp at February 19, 2007 5:38 PM