Know whether to consider a reverse mortgage if you need income.
A: A reverse mortgage lets homeowners aged at least 62 years convert part of the equity in their homes into tax-free cash without having to sell the home, give up title, or take on a new mortgage payment. Instead of the homeowner making monthly payments to a lender, as with a regular mortgage, the lender makes payments to the homeowner.
A reverse mortgage usually is considered as a last resort by someone who needs cash and whose home may be the only asset he or she can tap into. Due to falling real estate prices and the weak economy, however, the number of reverse mortgages has declined more than 30% since 2009.
The Department of Housing and Urban Development (HUD) has responded to economic conditions by updating its Home Equity Conversion Mortgage program with lower upfront costs than standard reverse mortgages However, the loans have a lower maximum amount that can be borrowed against the home's equity.
Review a reverse mortgage with an attorney, accountant, or HUD-certified counselor before making any decisions. For more information, visit http://www.fanniemae.com or call 800-7FANNIE (800-732-6643).
Send your money management questions to firstname.lastname@example.orgAnswers to our readers' questions were provided by Minoti Rajput, MBA, CFP, founder of Secure Financial Planning Strategies in Southfield, Michigan.