Homeowners age 62 or more wanting to downsize into a smaller, more manageable home can have their cake and eat it too by receiving a flow of income when they relocate. Of course, to be viable, their current larger-than-necessary home must have a net equity. If it does, Home Equity Conversion Mortgages (HECMs), a federally insured reverse mortgage program created by Congress as part of the Housing and Economic Recovery Act of 2008, provide funding for retiring homeowners who want to relocate and generate a monthly income from their new home. Under the program, a borrower over the age of 62 can tap into the equity of his property by pulling it out in one lump sum, in monthly installments, or as a credit line when purchasing another, smaller home.

first tuesday take: No mortgage payments are required until the borrower either sells the property, moves into aged care, or dies. However, interest and mortgage insurance premiums will relentlessly mount with each advancing month – and at noxious (toxic if your please) adjustable rates. This will produce financial consequences which negatively impact family members – when the ATM effect has run its course and that dissipated nest egg is needed, it’s gone.

Re: Reverse mortgages good option for some seniors,” from the Chicago Tribune