Here’s a situation familiar to more than a few people in West Windsor and Plainsboro: You are in your early 70s, retired, and you own a house that you bought for a pittance, it seems, but is suddenly assessed at $500,”000 or more. Your mortgage is all paid off, so you would like to call these the Golden Years. But now you are saddled with taxes that come to $1,”000 or so a month.##M:[more]##
What do you do? One thing to consider is a reverse mortgage, says Mary Hall of Princeton Mortgage Company, who will appear at the West Windsor Retirees meeting Monday, January 23, at the Senior Center. To understand the reverse mortgage just reverse everything you know about a conventional mortgage, says Hall. Instead of beginning with a big balance due and making monthly payments to the bank to pay it down, you begin with no money due, and you receive monthly payments from the bank and begin to build up a balance due.
In the case of our retiree, under an FHA-approved reverse mortgage, he or she could receive around $1,”200 a month. And because the FHA program is tied to actuarial tables (you must be at least 62 to qualify and the older you are the higher the monthly payment), those payments are guaranteed as long as you live in the house. And if at the end, the reverse mortgage borrower has outlived the predictions of the actuarial tables and the loan balance has grown greater than the value of the home, you or your estate doesn’t have to pay back the difference. “You never leave debt to your heirs,” says Hall.
“For a lot of people their biggest asset is their house,” says Hall, “and with a small or no mortgage balance, they are sitting on a lot of equity. And taxes — that’s a story I hear from a lot of borrowers. Their income is not going up at the same rate as their taxes.” For people with prior credit problems, a reverse mortgage could also be particularly attractive: “The borrower’s credit does not come into play,” Hall says. “The FHA requires an appraisal, and the house has to meet FHA requirements.”
Hall, a 1979 Fordham alumna who has been in the mortgage business for five years and has been a reverse mortgage specialist for the past three years, notes that “in the past there were some questionable practices” on the part of some reverse mortgage brokers. “Reverse mortgages got a black eye. But then the FHA stepped in and has provided seniors with a great deal of security. The bank doesn’t end up owning your home.”
Reverse mortgages work even when you have a balance remaining on your conventional mortgage. Assume our retiree with the $500,”000 house has a $100,”000 balance remaining on his original mortgage. The reverse mortgage would pay off that balance (relieving him of monthly payments that could be on the order of $2,”400), and give him monthly payments of around $600, guaranteed for life.
Hall’s own mother, age 86, just sold her house in New York to move closer to Hall’s family in Bucks County. But if circumstances had been different and she had wanted to stay in her house, “I would have recommended a reverse mortgage for her,” says Hall.
West Windsor Retirees, West Windsor Senior Center, 609-799-9068. “Reverse Mortgages for Seniors,” Mary Hall. Monday, January 23, 10 a.m.
