U.S. News: Reverse Mortgage Is One Way To Stay at Home During Pandemic

As employment options decline and older Americans remain at a heightened risk of developing severe cases of COVID-19 during the global pandemic, a reverse mortgage can be one tool that allows seniors to remain a home, writes U.S. News and World Report in an article published this week.

The article outlines several ways for seniors to remain at home rather than going out to work, including sharing knowledge online and tutoring; freelancing; seeking remote work; renting out space in an owned home; and tapping into home equity.

When it comes to tapping into home equity, U.S. News points to reverse mortgages as one option, for those who qualify and are at least 62 years old. A sale-leaseback is another option, the article notes.

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“Homeowners who want to avoid dipping into retirement funds during an economic downturn may find that their house is a source of cash,” the article writes. “However, with home equity lines of credit being suspended by some banks, retirees need to get creative.

“Reverse mortgages are one option for retirees who are at least 62 years old. With a reverse mortgage, a lender makes regular payments to a senior based on the value of their property. Once the homeowner moves or passes away, the loan must be repaid. This typically requires the sale of the property.”

Read the article at U.S. News and World Report.

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  • “‘With a reverse mortgage, a lender makes regular payments to a senior based on the value of their property. “‘ What nonsense.

    First, only ADJUSTABLE RATE HECMs currently offer that option. (All HECMs are reverse mortgages but NOT all reverse mortgages are HECMs, no matter what the practice in the industry is.) Second the amount of the payments are not based on the value of the home. They are based on the difference between

    1) the principal limit and

    2) the sum of the unpaid balance and the net amortized balances in set asides as of the time that the payouts begin;

    the payout is then determined based on a amortization concept where the computational interest is the sum of the EXPECTED INTEREST and the ongoing MIP annual rate —(reminder there are two — 0.5% on the oldest and most recently endorsed HECMs but 1.25% on those HECMs receiving case number assignments beginning after October 3, 2010 and ending before October 3, 2017) divided by 12 and 2) and the computational time period is either a fixed number of months or, in the case of tenure payments, the number of months until the youngest borrower turns 100 starting with the date that the payouts will begin.

    When one says it is based in any part on the value of the home, this shows such folks do not understand that the HECM is not a home value issue but a contract. Under the statute of frauds, all real estate related transactions must be in writing — i.e. must be contracts (including mortgages)!!! Beyond that these folks who emphasize home value show they do not understand the critical role that the Maximum Claim Amount plays in determining the HECM Principal Limit.

    It seems currently when most columnists are told things that are not exactly correct about reverse mortgages (and HECMs, in particular), they do little original research and run with that information as if the columnists lived in Greece in 360 BC and the information THEY received, came DIRECTLY from the gods on Mount Olympus.

    • John,

      Thank you. Everything is OK but like everyone else we are getting restless. The days here are beach living weather. What a waste…!!

      Take care and be safe,

      Jim Veale

    • One thing needs clarification, the time period for tenure payments. The time is the youngest borrower’s current age in HECM years to the actual age of 100. So if a senior is 69 and 5 months, that senior is exactly 69 years old in HECM years. That senior would have 31 years (or 372 months) to age one hundred for HECM tenure payment calculation purposes.

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