Home-equity equations
Are reverse mortgages the right direction for older Americans?
MarketWatch, January 20th, 2006
The number of Americans
over age 65 is expected to double in the next 30 years to 70 million.
And those older Americans will be living longer. But with one of the
lowest savings rates in the world, just what will they live on?
In the years to come, more and more retirees are likely to be
looking to tap one of their largest assets to get by financially --
their home equity. Reverse mortgages are one option they might consider.
The National Reverse Mortgage Lenders Association says 48% of
American households with at least one resident age 62 or older are
candidates for a reverse mortgage, and could receive an average of
$72,128 from a reverse mortgage.
With a reverse mortgage the lender makes payments back to the
homeowner. To qualify for this type of loan, the home must be main
residence. The loans must be repaid in full, including all interest and
other charges, when the last living borrower dies, sells the home or
permanently moves away.
Because you make no monthly payments, the amount you owe grows
larger over time. As your debt grows larger, the amount of cash you
would have left after selling and paying off the loan generally grows
smaller. The good news is that you can never owe more than your home's
value at the time the loan is repaid.
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