As the Baby Boomer Generation ages, there is more interest and attention directed at using the home to age in place and supplement retirement income.  Aging in place is the ability to continue residing in the current home and using products and services to enhance the ability to stay there, regardless of changing mental and physical health circumstances.  In a recent study conducted by AARP, 90% of adults 60 and older wish to remain in their homes indefinitely.  Older people report a better quality of life with more control and independence when they live on their own.  The challenge before them is how to pay for the increasing needed services as they live out their desire to stay in the home they have grown to love and cherish.

Seniors in Southern California and across the nation are struggling to make ends meet on fixed incomes that do not cover these increasing costs.  With lower rates on savings accounts and other retirement accounts, dropping home values, and rising credit card debt seniors are finding it more and more difficult to pay for even basic living expenses.  Through a recent project of the Insight for Community Economic Development, a new tool has been developed to quantify the costs of meeting the basic needs of older adults.  This tool is called the Elder Economic Security Standard Index.  This Index will be used to change the way the economic needs of older Californians are measured and addressed.  This Index reveals the true cost of basic needs for California seniors is twice the Federal Poverty Line for renters and three times the Federal Poverty Line for homeowners paying off their mortgages.  No wonder reverse mortgages are becoming more frequently used by homeowners to overcome this income gap.

Reverse mortgages are available for homeowners 62 and older who want to stay in their home and allows them to access a portion of their equity for any number of needs.  The loan is based upon the age of the youngest buyer, the appraised value of the home or the current HECM lending limit of $625,500, whichever is less, and current interest rates. Since accessing home equity is not a taxable event, the proceeds from the reverse mortgage are not subject to any income tax.  Homeowners always retain ownership of their home. There are no income, credit or health qualifications used for eligibility.  Since they will retain title, the borrower must live in the home, keep property taxes and fire insurance current, and reasonably maintain the home.  Borrowers can choose how to receive their funds, as a lump sum, monthly income or a line of credit.  There are no monthly mortgage payments required as long as one borrower lives in the home.  The loan must be repaid when all borrowers are permanently out of the home.  Reverse mortgages are used for a variety of reasons; however the most common reason is to retire mortgage and other debt to free up income to pay for the ever increasing cost of living.

Recently the FHA Home Equity Conversion Mortgage has been improved. Improvements include a higher nationwide lending limit of $625,500 until the end of 2009 and the option for seniors to purchase a new principle residence. The HECM for Purchase will allow seniors to more easily qualify for a mortgage to consummate the purchase.  With underwriting standards tightening, seniors will not have to worry about qualifying using typical forward mortgage criteria.  Upon closing of the purchase, the borrower must occupy the property within 60 days of the close of escrow.

To find out more about reverse mortgages