For senior citizens, the reality of retirement may cost more than they may have ever planned because they are simply living longer and incurring more expenses than they may have anticipated. One way that seniors have found as a means to generate money and avoid home foreclosure during the recession is through a reverse mortgage. While a reverse mortgage has helped Florida seniors stay in their homes, it has posed a unique problem for their heirs when the senior owners have passed on.
A reverse mortgage is a way for senior citizen homeowners to tap into home equity without an income or other typical qualifications associated with a traditional loan. It allows these homeowners to get the money they need to pay for living expenses without the risk of losing their home. They are popular, yet they are also confusing and can entail high interest rates.
One problem with this type of cash flow solution is that when the homeowner dies, the heirs must fight to get accurate information about the loan and may also be stuck paying money they were not prepared to pay. Currently, it is estimated that tens of thousands of heirs are dealing with foreclosure proceedings on homes they inherited because of reverse mortgages. This can be a significant drain on heirs who simply inherited the family home.
While a viable option for a senior to stay in the home they love, this type of approach may ultimate only work to delay a home foreclosure for families. It is vital that anyone interested in options to avoid home foreclosure in Florida realize the pros and cons of each solution they investigate. Some options, such as a debt reorganization and/or loan modifications, may be a better fit for seniors who are struggling.
Source: usfinancepost.com, “Are Reverse Mortgages Creating a New Housing Crisis?“, Christine Layton, March 28, 2014