Finance

Reverse Mortgages Can Save Seniors More Money

Posted: 7/21/2010

Many seniors who want to remain in their homes for as long as possible are finding out more about reverse mortgages.

(NAPSI)-Understanding the basics of a reverse mortgage could save you some money.

For example, some banks offer FHA-insured reverse mortgages with lower fees. With the reduced cost, senior homeowners may have access to more tax-free loan proceeds to help secure financial independence.

"This is great news for people who are retired and want to increase their monthly income. Reverse mortgage loans can help homeowners age 62 or over to improve their monthly cash flow and have real peace of mind," said Tim McDonald, head of Wells Fargo's Senior Products Group.

Reverse mortgage loan proceeds are paid to the senior homeowner in a lump sum, for a fixed-rate loan or a lump sum, monthly payment, a line of credit or a combination of the three for a variable rate loan.

Additionally, there are no credit, employment or income qualifications for the reverse mortgage programs. Homeowners must be at least 62 and own their house free and clear or able to pay it off with proceeds from the reverse mortgage.

Many seniors use the loan funds to supplement retirement income, meet unexpected medical expenses, or make much-needed improvements to their home.

"Social Security replaces only a fraction of preretirement earnings, so a reverse mortgage is a popular choice for retirees looking to secure financial independence," McDonald said.

McDonald added that with the recent reduction in Wells Fargo's origination and servicing fees, on average, customers can have up to $9,000 in additional reverse mortgage loan funds made available to them.

Reverse mortgages can be key to ensuring that seniors have the financial ability to age in place. Studies show that 85 percent of older Americans want to stay in their homes for as long as they can. Even modest homes have the potential to generate more than $600 in monthly proceeds from a variable-rate reverse mortgage--as long as the senior lives in the home as his or her primary home, keeps the taxes and insurance paid and maintains the house to FHA standards.

That amount of money can make a big difference in the lifestyle of someone in retirement.

The HECM is the most popular reverse mortgage in America today and is only available through an FHA-approved lender. The program has insured more than 580,000 reverse mortgages since 1989.

Wells Fargo attributes the growth of reverse mortgage loans to several factors, including that seniors have greater awareness and understanding of the reverse mortgage loan product, and the aging U.S. population--currently, more than 34 million Americans are over the age of 65.

By 2050, it is projected that 86.7 million Americans will be 65 or older.

The loan amount for a reverse mortgage is based on three factors: age of the youngest borrower, value of the home and current interest rates.

Numerous consumer safeguards are built into the program, including mandatory HUD-approved counseling, payment guarantees, capped interest rates and advanced disclosures.

A consumer-friendly website with a reverse mortgage calculator has been created by Wells Fargo to help seniors learn about reverse mortgages, download free educational materials, and calculate an estimate of how much a reverse mortgage could provide them in retirement. Visit www.wellsfargo.com/reverse.

Not all bank and mortgage companies originate reverse mortgages. Wells Fargo is the nation's leading retail originator of reverse mortgages.

About The Carmichael Times | Copyright Notice
Carmichael Times| Paul V. Scholl, Publisher
P.O. Box 14 | Carmichael, CA 95609-0014 | Telephone: 916-773-1111 | Fax Line 916-773-2999
Email: publisher@CarmichaelTimes.com | Site Designed and Hosted by TheSiteBarn.com
ISSN#: 1948-1918