In 2008, 78 million baby boomers will turn age 62 and qualify for a reverse mortgage. These seniors have 4 trillion dollars in home equity available to them in an illiquid asset, their house. In fact, these retirees have 50% of their net worth tied up in their homes. Estimates indicate that there is a target population of some 15 million senior households that both qualify for and are good potential candidates for the Department of Housing and Urban Development's home equity conversion mortgage (HECM)program. The HECM is when a lender advances, a senior age 62 or older and a current homeowner, money based on the houses equity. The senior homeowner can take the cash as a monthly payment all at once in a single lump sum of cash, as a regular monthly loan advance or as a credit line that lets you decide how much cash to use and when to use it. You may choose any combination of these payment plans also. The senior homeowner is not required to make any payments on the loan so long as he or she remains in the house. The lender collects the overall loan balance'which includes the accrued interest charges and other servicing charges as well as the amounts paid out to the senior when the house is sold or the owner dies.

In the last twelve months annualized 109,000 HECM's were originated which almost equals the entire amount done the last 10 years. Why has there been such a resistance to this product that seems almost to good to be true? There are some easily discernible reasons that help explain why this loan has had such a low penetration among its senior members. The first and most obvious one is the upfront charges which include FHA mortgage insurance and a two percent origination fee. There are other closing costs involved but all of these costs are financed into the loan with no out of pocket expenses. The whole sub prime mess has many seniors not trusting any loan company out there and are even more skeptical of newer programs like these. There are also some fears that seniors have that make it very hard to step into a Wisconsin reverse mortgage and I will go over some of them next. Needless to say if you can be aware of the many factors that play into this decision making it may be easier for you to objectively look at a reverse mortgage and make a better decision of it's effectiveness for you.

The fear of losing the equity in your house. Seniors grew up with the American dream of owning a house. They spent their lives focused on making their home free and clear of any liens. Paying off the mortgage was priority number one so it is counter-intuitive to add debt to it. By taking out a reverse mortgage you would be doing a 360 degree turn and actually be growing a mortgage versus paying it off. No matter how much sense a reverse mortgage may seem it will not make sense to a lot of seniors because of how they were financially raised.

Another fear seniors have is the complexity of taking out a Wisconsin reverse mortgage. With the program being so new and so few taken out there is not a whole lot of information available to seniors who are looking for more knowledge. For many people the unknown is the worst of all fears and will cause hesitation in making decisions. That is why HUD requires all seniors to participate in counseling sessions to ensure they understand reverse mortgages and the process of taking out that kind of mortgage. The funny thing about that is the well intended counseling will actually scare off some potential applicants.

A general fear of having flexibility in a seniors retirement years is a concern when making this financial decision. With everything considered a senior who takes out a reverse mortgage should expect to live in the house for at least 3 years if not more depending on age and loan size. Most seniors have an uneasy feeling about the future and sometimes may be unwilling to commit that far. Death, serious illness and similar issues weigh heavily on their minds.

My family wants the house and a Wisconsin reverse mortgage will not allow for this. We will have to sell the house so that the reverse mortgage can be paid off. First and foremost you will have to determine if the kids want the house or they are going to want to sell it. Normally if the kids have families and already live in an nice area they aren't going to want to move. If they do want the house they can always refinance the house and pay off the reverse mortgage. Remember it is a non recourse mortgage and you can't own more than its worth. The children will have many options available to them.

Seniors remember way back when these reverse mortgages were first available and the stories that were heard about people who did reverse mortgages. Lets just say stories abound about lenders taking advantage of seniors. It was because of this that HUD started to regulate HECM's and also insure them. One can argue that these types of mortgages are actually more safe than any other mortgage. when you bought your house or refinanced it did you have to meet a counselor? Most horror stories actually are from seniors taking out a reverse mortgage and using the funds into investments and then losing money. The reverse mortgage is not the fault, it was the adviser who stuck them in a risky fund.

Reverse mortgages are now just coming into the limelight. As with most things in life when they are originally released they have many naysayers. When the 30 year fixed was first brought out it was until many years later that the pundits realized it was a good idea. I expect that it will be a little more time, some more education, and Wisconsin reverse mortgages will also become a mainstay in our senior population.