Reverse Mortgage: Putting Your Money Where Your Home Is
COLLEGE STATION - A reverse mortgage is a series of payments made to the homeowner against the value of his or her home. Basically, a reverse mortgage pays the homeowner money based on the value of the home, said an expert from Texas Cooperative Extension.
Wait! Does this mean a reverse mortgage is payment made to the homeowner instead of a payment the homeowner makes? And he or she doesn’t even have to pack and move? Why aren’t more people taking out reverse mortgages?
Not so fast, said Nancy Granovsky, Extension family economics specialist.
For one thing, reverse mortgages are fairly new in Texas and aren’t available for every homeowner, she said.
“You can’t get one until you are 62,” she said.
The idea is to provide another source of money for older people who may need more current income, Granovsky said.
“A reverse mortgage is a return of money to you,” Granovsky said. “Instead of making mortgage payments, you will receive payments based on the value of your equity.”
Even with a reverse mortgage, homeowners pay the taxes and insurance on the property, she added.
“In a sense, you are selling your house back to the mortgage company and still maintaining your right to live in it.”
According to information from AARP’s Web site, homeowners who take out reverse mortgages can choose from four different payment methods: lump sum, monthly cash advances, credit line accounts or a combination of the three.
AARP also listed the two major ways reverse mortgages differ from regular mortgages: no need for a qualifying income and no monthly payments.
For more information visit the Web at http://www.aarp.org/money/revmort/ and click on the appropriate links.
But not every homeowner who qualifies will benefit from reverse mortgage.
“People who are going to the most out of it will be those with significant equity in their homes,” Granovsky said.
Homeowners who want to bequeath their property should remember the inheritance won’t be necessarily debt-free if a mortgage balance remains at the time of transfer, she said.
“For some people it makes good economic sense, but it seems to me it will be an issue of people wanting to leave property to their children,” Granovsky said. “They may have less to pass on if they have already received the reverse mortgage payment themselves.”
For more information on financial issues, visit Extension’s Family and Consumer Sciences Web site at http://fcs.tamu.edu/ and click on the link to Money.
Writer: Linda Anderson, (979) 862-1460,lw-anderson@tamu.edu
Contact: Nancy Granovsky, (979) 845-3850,n-granovsky@tamu.edu
