For 88-year-old Mort Linick, a red scooter symbolizes financial freedom. He bought the scooter with money he and his wife, Fran, get from the mortgage company, instead of sending the mortgage company money.
“Every fifth of the month, we get a check,” he says “And we don't have to worry about paying back.”
It's called a “reverse mortgage.” Instead of building equity, the Linicks are taking it out. They keep the title and the bank gets repaid with interest when they move or die.
Available only to those 62 and older, reverse mortgages are used by more and more retirees to enhance their lifestyles or make ends meet, like 77-year-old Peggy Gysel.
“I could just barely keep up,” she says.
Gysel’s mortgage consumed most of her Social Security check. But using a reverse mortgage, she paid off her Redford, Michigan home and established a line of credit. And that has made quite a difference in here life.
“I'm much more relaxed,” she says. “I can sleep at night.”
Unlike a typical mortgage, a reverse mortgage isn't based on your income or credit. Instead, lenders look at your age and your home's value, and make an unusual requirement before you can get the most popular of these loans — you must go through counseling to get the federally insured reverse mortgage.
“Many people think they want a reverse mortgage, but in the process of free counseling, discover that there's a local program or service that better meets their needs,” says Bronwyn Belling, a reverse mortgage specialist with AARP.
That’s especially true for those who plan to move within three years.
“By the time they pay all of the costs involved — the origination fees, the mortgage insurance premium — it's an expensive loan to get for a short term,” says Peter Bell with the National Reverse Mortgage Lenders Association.
But for the Linicks, who are staying put in the Los Angeles area, it strikes the perfect chord for financial harmony.