For two decades, reverse mortgages have allowed senior citizens like James Pysher to tap a portion of the equity they've built in their homes without incurring the monthly payment that comes with a home equity loan or line of credit.
That made it possible for the recently retired Pysher and his wife Sandra to hang on to the small but comfortable house on a sprawling Plainfield Township property they've called home for more than 18 years, despite losing a good chunk of their income.
Without the loan, Pysher said, they were barely making ends meet.
"There was no money left at the end of the month for us anymore with all our utilities and bills," said Pysher, 71, who took out his reverse mortgage in May through Whitehall Township-based AFC Reverse Mortgage. The cash allowed him to pay off his regular mortgage and still put some cash in the bank.
Pysher said he's now fairly confident that their home with its old stone fireplace can continue to be the chosen location for big family gatherings.
As more baby boomers approach retirement with longer life expectancies and stock investments that haven't lived up to expectations, the number of seniors exploring reverse mortgages to supplement their income is expected to increase significantly, said Peter Bell, president of the National Reverse Mortgage Lenders Association.
The number of government-insured reverse mortgages fell to 78,757 in the fiscal year that ended in October. That followed three record 100,000-plus years of reverse mortgages being backed by the Federal Housing Administration, according to the agency.
Last month, to appeal to new retirees, increase interest in the program and compete with home equity lines of credit for seniors with smaller borrowing needs, the FHA introduced a federally insured reverse mortgage option called the Saver.
One of the new program's primary draws is the near elimination of upfront mortgage insurance costs, which have been seen as one of reverse mortgages' biggest drawbacks.
Standard FHA-insured Home Equity Conversion Mortgage reverse mortgages carry an initial upfront premium of 2 percent of a home's value. The new HECM Saver mortgage, introduced in October by the FHA, has an upfront premium of just 0.01 percent in exchange for a lower loan maximum.
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