An increasing number of elder LGBT individuals are investing in reverse mortgages.
Steve DiMarcopresident of Baird & Warner Financial Services and a member of the firm's executive committeesaid that the mortgages are "federally insured offerings through HUD [ Department of Housing and Urban Development ] .
"With reverse mortgages, you can't be denied for one of these loans, provided that you're at least 62 years of age. There's a chart based on your age, and the lender will determine at what loan devalue they can finance your home."
"With me, I make a mortgage payment every month. Each payment has two components; one's for interest and the other's for principal reduction. With a reverse mortgage, a mortgage amount is agreed upon and interest accrues against that loan balance, but it's not paid on a monthly basisand is not really paid at alluntil the property is disposed of. 'Disposed of,' in the case of a senior, means that the individual dies and the asset is disposed of in the manner that person dictated. It's at that point that the loan is repaid to the federal government or the HUD program."
DiMarco stressed that while the person lives basically payment-free, "there is no free lunch. It's accruing against the principal balance so, in essence, the loan amount is growing. This is a great vehicle for those on a fixed income."
DiMarco illustrated reverse mortgages with an example: "You're 62 or older. You're free and clear. An appraiser says your house is worth about $400,000. The scale, in that case, would probably bring you up to a 65-percent loan devalue. So 65 percent of $400,000 is [ $260,000 ] . You can choose to put that in your bank account, or they'll give you a checkbook. You can draw on that, and the principal balance will grow accordingly.
"If your heirs were to sell your property after your passing, and sold it for $400,000with you owing [ $260,000 ] they'd keep [ the difference ] .
"However, let's say the house sells for $200,000. The heirs are not on the hook for the amount above and beyond what you sold the house forwhich is a pretty damn cool feature."
Editor's note: Websites on reverse mortgages are www.GayAndLesbianReverseMortgage.com, www.ReverseMortgageDaily.com and www.ReverseMortgageAdviser.com/illinois.html .
Steve can be reached at firstname.lastname@example.org .