The Newnan Times-Herald

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Reverse mortgages may be helpful to seniors


  • By Kandice Bell
  • |
  • Aug. 01, 2017 - 1:23 PM

Reverse mortgages may become a trend and can be helpful to seniors in their time of need, according to mortgage experts.

A reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash, according to www.reversemortgage.org, a website offering information about reverse mortgages presented by the National Reverse Mortgage Lenders Association.

The reverse mortgage loan was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care, but there is no restriction how reverse mortgage proceeds can be used, according to the website.

In a reverse mortgage, instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.

Robert Tanski with Southpoint Financial Services Inc. in Newnan said depending on the equity in the home, the loan will give the homeowner a cash payment, generally in two separate issues, usually one made at a closing and a year later or the homebuyer can get a credit line.

“The reverse mortgage guarantees they will live in the home for the remainder of their life, even if the spouse dies,” Tanski said. “When the last person perishes, the estate will have up to a year to pay off the money that was dispersed.”

Tanski said the borrower is still required to remain current on property taxes, homeowners insurance and any homeowners association dues.

Tanski said reverse mortgage loans can be very helpful to seniors, especially those who don’t have enough money to retire or lose the income from their spouse.

“What they're doing is giving people the opportunity to use the equity they have in a  particular property without having to sell it,” Tanski said. “If the property is vacated or the estate doesn’t pay off the loan, the property is put in foreclosure.”

Ray Evans with Element Funding in Newnan, said a more modern term for reverse mortgages is “home equity conversion mortgage.”

Evans said reverse mortgages are ideal for those who can’t qualify for a home equity line of credit, which allows borrowers to borrow funds as needed against the equity they have in their home.

“This will definitely become a huge trend, but there definitely needs to be an education process for the masses,” Evans said. “Basically, the goal for most people is to stop the mortgage payment. Now instead of paying $800, you can get those additional funds.”

If there are two people on the application, Evans said the loan is structured to be based off the younger person’s age on the application to increase the longevity of the loan.

“These loans really help with cash flow, sustaining a lifestyle, or the desire to do something they can’t afford to do,” Evans said.