There are a lot of reasons that seniors that take advantage of a reverse mortgage. The basic premise is that the senior is cash poor and house rich. Most seniors work there life to pay off the mortgage and when they get to retirement; many times they have put more money into the house than their retirement. Outliving your retirement is a good thing but you also want to have the cash to enjoy it. The following is an explanation of why reverse mortgages were taken out and gives us all good insight.
AARP and HUD/FHA completed a survey of homeowners who took a reverse mortgage. Here are the results of what they used their funds toward (respondents could choose more than one response):
Health care 67%
Repay loans 55%
Reduce burden on children 50%
Home repair 50%
Pay taxes 38%
Travel 14%
A couple of troubling stats here. The first one that jumped out is the fact that 55% still had a mortgage. That mortgage payment was crimping the lifestyle of retired seniors. An advantage of the reverse mortgage is no mortgage payments anymore.
Secondly the respondents said they needed money for health care. If you are a senior you know how much money it costs for prescriptions and long term care. Unfortunately Medicare doesn't cover enough of these costs and sometimes extra cash is needed. Unless you want to wok part time (not what is
envisioned for retirement) you have very few options.
One of the biggest fears a senior has is that they aren't leaving the house for their children. If your children are having to support you financially in retirement it would be easier to take out a reverse mortgage and ease the burden. I am sure most heirs would rather you be self sufficient while living
in the house you want too. The other option of a nursing home etc. is not the preferred method of visiting.
As you can see reverse mortgages are taken out for very good reasons. The money is not frivolously being spent. If a senior needs extra income to stay in their house, get the best medicine, or ease the burden of their children it makes a lot of sense. If you find yourself in a cash poor situation and are 62 years and older you may want to look at a reverse mortgage. If you have any questions please call me 414-531-4035 and ask for David.
David Forer is a financial services professional of 15 years who helps seniors get out of debt, improve credit, and take out a reverse mortgage. He can be reached at 414-531-4035 or go to his website at wisconsinreversemortgages.net
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