The housing bill signed by President Bush on July 30 raises the amount seniors can borrow using federally backed reverse mortgages and lowers the cost of getting the cash. A reverse mortgage is a loan against your home if you’re generally age 62 and over that doesn’t have to be paid back as long as you live in that house. Most reverse mortgages are home equity conversion mortgages, which are backed by the Federal Housing Administration, so you’ll still get your money even if the lender goes under. (The other two types are private loans and single-purpose reverse mortgages offered by some state and local government agencies and nonprofit organizations.) Avoid fees. High cost is the reason 63 percent of reverse-mortgage shoppers ultimately decided against applying for the loan, according to a December 2007 AARP survey. Also, bargain on closing costs, service fees, mortgage insurance premiums, and interest rates.
Barbara Stucki, director of home equity initiatives for the National Council on Aging, recommends spending an hour or longer discussing the loan. Keep up the house. "If there is hurricane or flood damage to the home that you can’t repair, the loan is due," cautions Prescott Cole, an attorney and elder-care advocate who has worked with numerous reverse-mortgage borrowers. "If you can’t repay the loan, you will lose your house."
"If you go into a nursing home for longer than 12 months, the loan is due."