More seniors turning to reverse mortgages

When Judy Kralik and her husband, Andrew, downsized and moved to Valparaiso in 2005, she thought life would be easier.

But when her husband of 47 years died from esophageal cancer less than a year later, things got tough: her income did not comfortably cover her mortgage and other living expenses.

"Our income just really went down, and I was on Social Security," Kralik said.

Kralik, 69, turned to a reverse mortgage to get the extra money she needed. She now receives a check each month for about $435 that will continue for the rest of her life.

Like Kralik, more seniors are using reverse mortgages to tap into their home equity and pay off debt. Reverse mortgages allow the borrower to receive income in monthly installments, a lump-sum payment or a line of credit from which the borrower can make periodic withdrawals.

The loan becomes due only when the property is sold or the youngest borrower on the mortgage dies, and the house is used as collateral for the government-insured loan and interest.

Mortgage brokers such as Bob Allen say reverse mortgages have become part of a "normal retirement plan."

"The reasons people take them out are as varied as people's lives," said Allen, who also has a reverse mortgage.

Statewide, the number of reverse mortgages rose 20 percent from 669 in 2008 to 803 this year. And nationally, reverse mortgages -- known as Home Equity Conversion Mortgages -- jumped 5 percent from 73,875 to 77,908 during the same period.

When Allen saw his 401(k) plummeting, he knew something had to be done. Upon retiring at 65, Allen and his wife, Zeta, got a reverse mortgage on their five-bedroom Hobart home and are now receiving $518 a month to supplement their retirement income.

Loan amounts are largely based on the borrower's age, home value and current interest rates, and the home must be the primary residence. There are no income requirements, and Congress increased the maximum home value that is considered from $417,000 to $625,500, making reverse mortgages available to more homeowners.

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