By Jack D. Belles
In communities all across the nation, an increasing number of retirees are faced with the very real threat of losing their home because they can no longer afford to make their mortgage payments. According to Realty Trac’s U.S. Foreclosure Market Report, more than 3.9. million properties received a foreclosure filing in 2010.
Along with the rising cost of living expenses on a fixed income, seniors are especially vulnerable to foreclosure due to the cost of a prolonged illness or loss of part of their income from Social Security when a spouse passes away.
Retirees facing foreclosure typically have two options. They can refinance their mortgage, which includes past-due payments, late fees, collection fees and legal fees assessed by the lender. Over the last couple of years the lending requirements have changed dramatically, making the refinance of a delinquent mortgage almost impossible.
Most lenders now require good credit scores as the first test to qualification along with documented income enough to qualify for the monthly payment. The other option is to try to salvage some equity by selling their home. However, after paying off the mortgage the retiree may be left with money and will be forced to rent. Paying $1,000.00 a month in rent usually is not a viable option.
The reverse mortgage program provides a third option: it enables homeowners who are 62 and older to pay off their existing mortgage and have no monthly mortgage payment as long as they live in their home. The reverse mortgage program does not use credit or income to qualify for loan approval. Qualification is based on the age of the youngest borrower, appraised value of the property and current interest rates.
With a reverse mortgage you still own your property and you control the balance of the reverse mortgage funds after your mortgage is paid off. You may choose to use the additional funds to:
•Pay off credit card debt;
•Supplement your monthly cash flow; and
•Make home repairs.
The reverse mortgage option may not be for all senior homeowners, especially for those who have a small amount of equity left in their home. If possible, it is a good idea to explore the reverse mortgage option before a homeowner goes into default on his or her mortgage.
When I interview people, the majority say, “I am worried about money.” It is hard to put a price on peace of mind. Having the necessary funds available to meet your obligations provides a sense of security that can take the worry of money off your plate. Educating yourself about the reverse mortgage program is important to your financial success.
Jack Belles is a reverse mortgage specialist and the co-founder of Reverse Mortgage of New England. He can be reached at 800-750-4419 or Jack@ReverseAnswers.com and at www.ReverseAnswers.com. Archives of articles from previous issues can be read at www.fiftyplusadvocate.com.