The recent economic challenges have affected many retired individuals’ ability to pay for everyday living expenses as well as major unexpected expenses. Because many Americans have put such a high emphasis on home ownership, the majority of their wealth may be tied up in home equity, limiting their ability to access money to pay expenses. For many individuals in this circumstance, reverse mortgages are attractive because of their ability to provide access to home equity, while retaining the borrower’s right to live in their home. However, reverse mortgages are complex financial products that carry significant impacts on the long term financial well-being of borrowers.
In 2012, the Consumer Financial Protection Bureau (CFPB) published the results of a study it conducted on reverse mortgages. They reported that in fiscal year 2011, 46 percent of new reverse mortgage borrowers were younger than age 70. Reverse mortgages are a complex financial product and difficult for consumers to understand. Misleading or deceptive advertising confuses consumers, further complicating the reverse mortgage process. The CFPB reported that 1 in 10 reverse mortgages were in default in fiscal year 2011. Most of these defaults occurred because homeowners did not maintain homeowners insurance or pay property taxes.
Mark your calendars for Friday, May 8th and plan to join me at the Great Bend Senior Center for a 1 p.m. educational program titled, “Understanding Reverse Mortgages: Do They Make Sense for You?” K-State Research and Extension specialists have published a great fact sheet by the same title which I will share copies of with the audience. The lesson objectives for participants on May 8th are:
• Understand the three ways to get cash from their homes
• Understand the difference between forward mortgages, reverse mortgages and home equity loans
• Know what factors to consider when evaluating a reverse mortgage
• Become familiar with the product features, eligibility requirements, costs, available loan amounts, and borrower obligations associated with the most common reverse mortgage product, the Home Equity Conversion Mortgage (HECM) from the Federal Housing Administration.
Come and learn about reverse mortgages. Then you can make an educated decision if they make sense to you.
Donna Krug is the Family & Consumer Science Agent with K-State Research and Extension – Barton County. You may reach her at: (620)793-1910 or dkrug@ksu.edu