by Frank Costa
Special to Inside
It's again time for Chicago homeowners to pay their semi-annual property taxes, and for many senior homeowners, it is also time for some tough decision making. "Right now, there are no easy answers. I don't have enough money but I do not want to move either," says one Lincoln Square homeowner who has owned his home on Sunnyside Ave. for 42 years. His property taxes have risen 22 percent since his last assessment.
Increasing property taxes, coupled with rising costs in health insurance, have forced many seniors to consider selling their property—in some cases, property they have owned for many years.
There are options available to seniors that allow them to maintain their residences in the face of these rising costs. One financial instrument gaining in popularity is the reverse mortgage. Reverse mortgage volumes rose 20 percent last year in the U.S.
A reverse mortgage is a deferred home equity line of credit, where the homeowner defers repayment of the loan as long as they live in their home. It is ideal for those 62 or older who own all or a majority of their home and are looking for ways to increase their income or pay off debt. Reverse mortgages are designed and insured by the federal government, and they are insured to protect the homeowner in case the home's value falls below what the homeowner has borrowed. The homeowner retains the title to the property at all times.
The interest rate for the Federal Housing Authority (FHA)-sponsored Home Equity Conversion Mortgage is currently at 2.75 percent.
"I know of no other way for a senior living on a fixed income to access this amount of money at these rates," says Pat Donohue, a Reverse Mortgage Consultant and the manager of the Chicago office for Continental Funding Corporation, located in Lincoln Square. "The major benefits are that the homeowners dramatically increase their quality of life and that they also continue to benefit from property value increases," says Donohue.
Many homeowners can then pay off debt, fund home improvements, or buy long-term care insurance, life insurance or annuities with the proceeds. In 2003, there were 11 different Continental Funding clients who avoided foreclosure on their property by paying off their property taxes in arrears using the proceeds from a reverse mortgage.
Reverse mortgages will continue to grow in popularity because many seniors want to continue to reside in their homes and are willing to tap the equity in their homes to do so. Reverse mortgages are not for everyone but, for many, the benefits can be quite compelling. To learn more about reverse mortgages, contact Patrick Donohue, Continental Funding Corporation, at (773) 491-9500. |
