Pick up any newspaper or magazine today and you will find articles highlighting the financial squeeze affecting American seniors. "Seniors are outliving their financial resources." "Baby boomers haven't saved for retirement!" "Cost of medical care squeezes seniors, forcing tough choices." Many seniors are facing a financial crisis in retirement. In the past the choices were few-sell their home, move in with children or rent in a retirement facility.

Recently, seniors have come aware of another choice-the Reverse Mortgage. Reverse mortgages are designed to supply an income stream while allowing seniors to stay in their homes. Unlike traditional home loans, there are no monthly payments and no payoff is required as long as the individual owns and lives in his or her home.

A reverse mortgage is a loan against the equity in a home with no repayment until the home is either sold or no longer occupied by the borrower. When a home is sold the remaining equity is paid to the borrower or his heirs. The borrower never owes more than the home is worth, regardless of the direction of real estate prices. If a reverse mortgage borrower should end up with a loan amount larger than the market value of the home at the time the home is sold, mortgage insurance, the federal government and the lender absorb the loss.

The borrower's obligations include paying property taxes, homeowners' insurance and keeping the home in good repair. Reverse mortgages are available to homeowners age 62 or older with sufficient equity in their homes. There are no income requirements or credit evaluations. Nearly any type of primary residence is acceptable as collateral for a reverse mortgage including townhomes, condominiums, 1-4 family homes and manufactured housing. Reverse mortgage payments (to the borrower) are tax-free and can be used for any purpose.

Stop. Tax free income and no repayments until the sale of the home? It sounds too good to be true! There must be a catch! Why would the US Government through the Federal Housing Administration(FHA) and the Federal National Mortgage Association(FNMA) set up such a program? First, federal and state governments are heavily involved in funding retirement and medical care for seniors through Medicaid and Social Security. A study released in 2005 by the National Council on the Aging (NCOA) funded by the Robert Wood Johnson foundation and the Centers for Medicare and Medicaid Services showed how reverse mortgages could alleviate financial pressure not just for seniors but also for state Medicaid programs and the federal government. The US and state governments benefit through lower costs. Seniors get to stay in their homes while augmenting their retirement income. To parse an overused turn of phrase it is a "win/win situation"

An AARP study showed that 83% of seniors preferred to stay in their own homes vs. any other living arrangement. It also estimated that over 20 million senior households maintained an estimated 2 trillion dollars in home equity. These facts, along with rapidly increasing longevity and medical costs, have created the conditions in which reverse mortgage products can and will fill an important need for seniors and for government.

Contact a reverse mortgage specialist to discuss your individual situation and what may be available to you.

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