A reverse mortgage allows a senior citizen to receive funds that are based on the equity value of their home. In other words, a reverse mortgage allows a person to borrow against their home equity. In the United States, a person must be at least 62 years of age to initiate a reverse mortgage, and there are minimum requirements for the level home equity. The funds are provided by a lending institution and can be in the form of periodic income payments or a lump sum. In 2009, Congress increased the maximum home value that can be borrowed against to $625,000 from $417,000. Almost all reverse mortgages are backed or insured by the Federal Housing Administration (FHA). A primary residence is a meaningful portion of the net worth of many senior citizens. As a result, a reverse mortgage can play a very important role in financial planning because it allows seniors to derive income from a significant but largely illiquid asset.
Tim Harrington is the Chairman and CEO of start-up eRollover.
Tim is a seasoned technology and consumer marketing entrepreneur. Among Tim’s accomplishments is the ecommerce company Fogdog Sports--a venture he led from inception through successful IPO and post-IPO merger.
We had the opportunity to speak with Tim before his presentation at the Finovate conference in San Francisco.
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The National Retirement Risk Index is available through the Center for Retirement Research at Boston College.
The Index is intended to show the share of American households that are at risk of not being able to maintain their pre-retirement standard of living in retirement.
