Unlocking your home equity
More people are using reverse mortgages to finance retirement, but the costs are steep.
The housing rescue package that Congress scrambled to pass in July was aimed primarily at stemming foreclosures and shoring up Fannie Mae and Freddie Mac. But it also contains provisions that make reverse mortgages a better deal for older homeowners who want to turn their equity into cash.
Lawmakers are paying attention to reverse mortgages because these once-marginal products have exploded over the past decade, thanks to low interest rates and rising home values. The federal government, which backs more than 90% of all such loans through the Home Equity Conversion Mortgage (HECM) program, guaranteed 107,400 reverse mortgages last year, up from 7,900 in 1998. What’s more, an industry group estimates that even after the drop in housing prices, seniors’ equity in their homes was worth $4.2 trillion at the end of 2007. With slimmer savings and pensions than their parents had, more boomers will probably be turning to reverse mortgages when they retire. But these products are much more complicated than your garden-variety loan, so before you rush to download an application, you have to do some homework.
Post from: Reverse Mortgage Loan Blog
