Reverse mortgage can be financial help to senior homeowners

Tuesday, October 2, 2007

Local senior citizens may have a tax free source of income right in their own homes.

Senior citizens who are 62 years of age or older and own their own home can apply to receive a reverse mortgage. This government approved mortgage is a guaranteed source of tax-free income and is a way to benefit from the equity in the senior's home, Ted Koller, a loan officer with Carteret Mortgage, 323 South Main St., said.

According to the U.S. Department of Housing and Urban Development's (HUD) Web site located at www.hud.gov, the reverse mortgage is a secure program that offers financial assistance to senior citizens.

"HUD's Reverse Mortgage is a federally-insured private loan, and it's a safe plan that can give older Americans greater financial security," the Web site said. "Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more. A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you."

Senior citizens who meet the age requirement and own their own homes, must also reside in those homes in order for a loan to be granted, Koller said. Should the federally insured reverse mortgage be granted, the applicant would not need to pay back the mortgage as long as they are living in the home, he said.

For seniors who need an extra source of income, this reverse mortgage offers added income that is tax free and will not interfere with their regular Social Security retirement benefits or their Medicare benefits, Koller said.

Although this type of loan has many positive benefits, it may not be the proper loan for every senior citizen. For a senior citizen who is on supplemental Social Security Income (SSI) or Medicaid, this loan could affect the outcome of these services, Koller said.

The amount of money that can be loaned to a homeowner depends on the homeowner's age, the value of the home and the current interest rate, Koller said. According to Koller the amount of money that an individual makes per year does not play a role in determining if that individual is eligible for the reverse mortgage, nor does the individual's current credit score, he said.

Any senior citizen interested in a reverse loan must first call an agency qualified in Home Equity Conversion Mortgage (HECM) counseling before seeking the loan from a loan officer such as Koller, he said. Some of the agencies qualified to provide the needed counseling are the National Foundation for Credit Counseling, (866) 698-6322; Money Management International, (877) 908-2227 and the American Association of Retired Persons, (800) 209-8085.

Koller said that a HUD approved counselor can answer many questions but cannot recommend a lender. Also, he said that if the applicant uses a financial planner to attain the loan, that planner could discuss with the person how the reverse mortgage could affect retirement needs.

According to Koller, the first reverse mortgage was given to the widow of a football coach in 1961 by Nelson Haynes of Deering Savings and Loans in Portland, Neb. From that time, the reverse mortgage has grown into a nation-wide program today.

For more information about a reverse mortgage, contact Koller at (620) 224-2900.