The trend toward home foreclosures and the loss of retirement savings and/or investments have affected every segment of the population to some extent, but this particular combination of events has taken its greatest toll on older baby boomers and their seniors.
Reverse mortgages, as explained by the U.S. Federal Trade Commission , are available to people who have equity in their homes and want to leverage that equity into money available to them in the form of monthly payments. Generally, the loan doesn't have to be repaid until the mortgagee dies, moves from the home or becomes incapacitated. Additionally, the money received from a reverse mortgage is tax-free.
But reverse mortgages might well come under the heading, "If it sounds too good to be true, it probably is." Loan origination fees can be as much as $30,000. BusinessInsider.com reports that 740,000 reverse mortgages had been taken out through the end of fiscal year 2011. More than 9 percent of these loans are already in default, with borrowers citing inability to pay property taxes and/or homeowner's insurance.
Default on a reverse mortgage can result in foreclosure. Foreclosure means the loan becomes immediately due and payable, including all interest accrued.
In the United Kingdom, older home owners are finding it increasingly difficult to obtain refinancing on mortgages to decrease interest rates as explained by ThisisMoney.co.uk . The banks there are risk averse, and people as young as in their 50s and 60s are experiencing rejections of refinancing offers if the repayment would extend into retirement years.
In August, the Sun Sentinel reported on the increasing trend in the United States of retirees and near-retirees seeking to refinance mortgages. This is a change from recent decades where many retirees had their homes paid off before retirement. In the current era of economic woes, baby boomers have chosen -- or been forced by financial situations -- to carry a house payment into retirement, and in some cases, well beyond.
Both of these financial trends will impact the futures of many baby boomers and their seniors -- and likely their heirs in time to come. As the single largest segment of the population, baby boomers have set trends throughout their lifetimes. How these trends will affect the economy now and in the future remains to be seen. One thing is certain; financial mistakes made in retirement years have little chance of being recouped in the future. Baby boomers and their seniors need to tread cautiously.
Smack dab in the middle of the baby boomer generation, L.L. Woodard is a proud resident of "The Red Man" state. With what he hopes is an everyman's view of life's concerns both in his state and throughout the nation, Woodard presents facts and opinions based on common-sense solutions.
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- reverse mortgage
- baby boomers