Home Equity Mortgage Corporation

You may have heard of reverse mortgages as a way for seniors to tap the equity in their homes to pay for living expenses, but there are other ways that homeowners are using their homes to get by.

Many seniors are on fixed incomes, with Social Security payments providing a significant portion of their monthly income. In fact, Social Security provided at least half of total income for more than half of aged couples and nearly three-quarters of non-married beneficiaries in 2010. And it provided 90 percent or more of income for 23 percent of aged beneficiary couples and 46% of aged nonmarried beneficiaries. The average monthly benefit at the beginning of 2012 was $1230. It's no surprise, then, that reverse mortgages are often used to help cover essential living expenses.

What you may not have heard, though, are some of the creative ways homeowners are using reverse mortgages to help them navigate today's challenging economy. I recently interviewed Russell Silver, senior residential mortgage consultant for US Mortgage Corporation, on my radio show "Talk Credit Radio." (The firm also sponsors some of the show's podcasts). Following is an edited excerpt from that interview.

First, the basics. "A reverse mortgage is a federally-insured mortgage, only available to homeowners 62 years or older, " explains Silver. "Basically a reverse mortgage is just what it sounds like: You do not make payments. As long as you own your home you're not obligated to make any mortgage payments, you're only required to pay your taxes and your homeowner's insurance."

"If you have a mortgage on the property currently and do a reverse mortgage, the old mortgage is paid off, and a new reverse mortgage is put in place. Whatever you want to use the money for, you can use it and nobody's going to tell you what you can do and can't do with the money."

Here are some ways his clients, and other homeowners, are using reverse mortgages:

1. Have a say in how your heirs spend their inheritance.

If you're like many seniors today, the equity in your home will be a major part of the inheritance you leave your heirs. As much as you hope that money will be put to good use, there's often a nagging worry that it will be wasted. Maybe you're worried that your granddaughter will use it for that plastic surgery she's been hinting about. Or that your money will end up in the hands of your son's freeloading girlfriend.

Or maybe you'd just like to see your kids and grandkids enjoy your money now rather than after you are gone. A reverse mortgage may help you accomplish that. Silver explains:

I can't even tell you how many grandparents or even parents we speak to that want to take out a reverse mortgage to help out their kids. A lot of people use it for their kids' or grandkids' college educations. One couple took their entire family on a cruise for their 50th wedding anniversary. It was something they never ever would have been able to do otherwise.

Prepayment insight: Analysis of Option One Mortgage Corporation's hybrid adjustable rate mortgage home equity loan portfolio
Book (Banc One Capital Markets)


2009-08-07 08:00:46 by spponfedbs

Peter Schiff: This is just getting started. It's not just subprimes. This is a problem for the entire mortgage industry. It's not just people with bad credit that committed to mortgages they couldn't afford. It's not just people with bad credit who are going to see their home equity vanish... This is going to be an enormous credit crunch...
Neil Cavuto: You must be a laugh-riot at parties.
Ben Stein: ...subprime is tiny. Subprime is a tiny, tiny blip.
Peter Schiff: It's not tiny. And again, it's not just subprime

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