Reverse mortgages appeal to elderly


Published: Wednesday, January 1, 2003 at 6:01 a.m.
Last Modified: Tuesday, December 31, 2002 at 11:07 p.m.
WASHINGTON - Helen Grady thought she had run out of options. The 76-year-old widow was in poor health and in danger of losing her home because of mounting debts. Her roof leaked, the well was contaminated and the dishwasher was broken.
"I knew I was losing the house and it was going to be sold for taxes. I used to be awake all night thinking, 'Oh God, Where am I going to go? What's going to become of me,' " said Grady, who has no living children and lives off $1,008 a month in Social Security.
Then the Canadensis, Pa., woman went to a seniors' meeting where she heard about reverse mortgages, and later took one out.
"This mortgage has given me the right to stay independent," Grady said. She had to sign an agreement to stay in the home for five years as part of her deal. "Suits me. I told them when I go out of this house I'm going feet first and with a tag on my toe. I love my spot."
Reverse mortgages have been available for years but didn't really gain popularity until the early 1990s.
Essentially a mirror image of traditional mortgages, they let homeowners borrow against the equity they've built up without having to pay the money back until they either move or die.
Today, reverse mortgages are increasingly a salvation for seniors with mounting health costs and retirement incomes that have fallen in tandem with the stock market and interest rates.
The National Reverse Mortgage Lenders Association reported that for the fiscal year that ended Sept. 30, lenders closed a record 13,049 reverse mortgages - a 63 percent increase over the previous record of 7,982 in 1999. Los Angeles, Denver, New York, Detroit, San Francisco, Chicago, Seattle, Santa Ana, Calif., Richmond, Va. and Newark, N.J., were the top 10 areas where seniors sought the loans.
A reverse mortgage allows a senior citizen to "continue to live independently, and comfortably, right where they are," said Peter Bell, president of the reverse mortgage lenders association.
To be eligible, a person must be at least 62 years old and have some home equity. The loan amount depends on the value of the home, the amount of equity in it, and interest rates. The loan can be taken as a lump sum, a line of credit or as fixed monthly payments.
There are no restrictions on using the money. Borrowers can use it to supplement retirement income or for much-needed upgrades and repairs to their homes.
In many cases, seniors have used the money to make the home more accessible as they age, converting first-floor rooms to bedrooms and installing ramps and handle bars.
The loan is not due until the homeowner dies or moves from the house.
In the case of a homeowner's death, heirs can sell the house, pay off the debt and split any remaining equity.
Alice and Glen Akins of Hollywood Hills, Calif., took out a reverse mortgage six years ago because it was "getting a little bit tight and we didn't like that," said Mrs. Akins, 79.
The couple, who have no children, now get an additional $700 monthly from the loan. They used some of the money to build a new bathroom and pay for medical tests not covered by insurance.
"It has just made life easier and more comfortable," she said.
Bronwyn Belling, a reverse mortgage specialist with AARP, which represents people over age 50, said the association has seen a "dramatic upsurge" in requests for printed materials and visits to the section of its Web site devoted to reverse mortgages.
AARP encourages seniors to do research and carefully explore all of their options before deciding to seek a reverse mortgage.

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