Robert Simmons, a 67-year-old retired personal chef, wanted to pay off debt and travel to China where he sponsors the tuition of several children.
He recently took a reverse mortgage on his home of nearly 20 years in tony Southampton, New York, using the proceeds to pay down his remaining $80,000 mortgage, close a credit line for house repairs and buy a new car outright.
"I wasn't struggling to pay bills, but I needed just the extra boost to give me a good cushion so I could do nice traveling and have an enjoyable time in my declining years. Before I go out completely, I want to see something," he said.
Simmons is among a burgeoning pool of people aged 62 or older taking out reverse mortgages, which enable them to tap into home equity for extra cash.
The typical borrower is no longer the elderly widow who is house-rich and cash-poor, determined to stay in her home and make ends meet. As reverse mortgages grow more popular, borrowers are younger and are often couples using the money to improve lifestyles during longer retirements.
Loans can be taken as lump sums, fixed monthly payments, lines of credit or a combination. Homeowners keep title to their houses. Mortgages are not repaid until borrowers move or die and repayment cannot exceed the home's value.
"Everything was paid off and I'm debt-free except for credit cards," says Simmons. "It just gives an ease of mind that I don't have to pay for anything now."
Source: Lynn Adler, Rueters USA, Nov. 17, 2005