COLUMBUS (WCMH) — In 1989, The Department of Housing and Urban Development (HUD) decided a reverse mortgage was a great way for seniors to “age in place” and still have a guaranteed source of income.
The only requirement was the borrower had to be 62 or older and have equity in their homes. There was no credit check.
The financial crisis for 2008 and 2009 caught many seniors in financial jeopardy. Some homeowners did not realize they were still required to pay their property taxes and home owners insurance. Some reverse mortgage loans went into foreclosure.
All of the issues forced HUD to make changes to the program.
“Now they look at their credit. They’re looking at their finances. They’re doing a financial assessment, the lenders are,” says Layden Hale, Senior Counseling Advisor of Homeport, a non-profit housing developer.
A reverse mortgage is not for everyone. You need to determine your goals.
A line of credit might be a better choice. If you’re only planning to live 4 or 5 years in your home, a reverse mortgage might not be the answer especially if you have heirs who may want the property after you die.
“There are some of my clients who try to get the reverse mortgage because they’re trying to save their home and I tell my clients, all my clients, reverse mortgages are good for some people and not good for others,” says Hale.
Bottom line: Do a lot of homework before you speak to a lender. You can start by finding information for free from HUD’s website and Homeport’s website.