Their retirement accounts flattened by the sour economy, older homeowners are increasingly turning to so-called reverse mortgages -- the sometimes expensive loans that don't require payments until the borrower sells the home or dies.
The Federal Housing Administration insured 11,261 reverse mortgages in March, a jump of 17% from the same month last year.Experts say the loans -- which are only available to those over age 62 -- are on the rise for several reasons, including provisions in the federal stimulus package that have made them cheaper and easier to get.
Increasingly, lenders say, even well-off seniors are relying on the loans to provide monthly spending money at a time when their retirement accounts and other income may be limited.
Strapped homeowners with fairly sizable mortgages are paying off their notes and living rent-free in their homes, said Mike Branson, Chief Executive of All Reverse Mortgage Co. in Garden Grove.
"People are looking at [reverse mortgages] to live now, which wasn't the case that long ago," [Nancy West, a spokeswoman for the U.S. Department of Housing and Urban Development] said. "A lot of the time, they're seniors that have mortgages that they shouldn't have been put into -- and have lost their livelihoods in the process."
Using reverse mortgages to stay out of poverty is probably necessary for many people. Although we are still concerned about long-term issues involved with reverse mortgages. Since one can start borrowing at 62 and easily live another 30 years problems of poverty may not be alleviated, rather just pushed down the road. These reverse mortgages are a short-term solution to a big and growing problem.