Reverse Mortgages Gain More Popularity to Finance Retirement

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Most seniors have not used their home equity to  finance  retirement. But more and more seniors are wondering whether there is a right time to do so. Well, for some seniors that time is now.Senior’s use of Home Equity Conversion Mortgages, a government-backed reverse mortgage, increased by over 4% in fiscal year 2008, which ended September 30, compared to the same period in 2007, according to the Department of Housing and Urban Development.

The forecast going forward is that even more seniors struggling to pay their bills will consider reverse mortgages next year. A survey indicates that more than 25% of seniors over age 65 are borrowing against their home or trying to sell the home to boost their incomes. Borrowing with a forward mortgage can be problematic because the loan has to be repaid and can mean additional cash flow problems in the future. Selling would be great in a rising market, but with today’s declining market, this may be the worst time to sell.

Depending on an individual’s or couple’s financial profile, there may be no need for a reverse mortgage. However, many seniors are at the point where a reverse mortgage makes a lot of sense. 50 to 75% of all seniors say that the current economic crisis has permanently damaged their retirement savings, it is the worst they’ve ever seen and they are making adjustments to their lifestyle as a result. As they do their homework, more seniors are beginning to realize that a reverse mortgage can reposition them to their desired state and for some it exceeds their expectations.

A reverse mortgage does not have to last forever. The home can be sold at a later time to pay off the reverse. Rather than sell your home in today’s declining market, a reverse mortgage could be used as a financial tool to weather the financial climate. The senior could wait to sell into a more favorable market. While the fees for the reverse mortgage must be considered, it may be a much better option than selling your house in a market bottom. Imagine a home that appraised for $200,000 one year ago that has lost 30% or $60,000 of its value. You should seriously consider a reverse mortgage before you allow yourself to lose that amount of money in what very well may be a market bottom.

Source by George Fisher

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