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COLORADO SPRING, Colo. – With individuals age 62 or older increasingly making up a larger segment of the U.S. population, Air Academy FCU has begun offering reverse mortgages to give members in this age group who are homeowners a way to tap into their home equity without losing title. Shannon Van Sickler, VP, Mortgage Banking Division of the $293.7 million AAFCU estimated 15% of the CU’s more than 41,000 members are age 62 or older. “This is a product that’s relevant for a lot of people, but they’re reluctant to take a look at it because they don’t understand it,” she explained. “Many of our members in this age group are on fixed incomes. They have health care challenges or other expenses. They don’t want to take out home equity loans to help pay for these types things, but their homes have built up a lot of equity over the years and they’re just sitting on that,” she added AAFCU began offering reverse mortgages in August, and at press time Van Sickler said there was already one in the CU’s pipeline. In addition she said the mortgage banking division has received several inquiries and held a seminar on the product last month that was well attended. “Our members are ecstatic the credit union is educating them on this gray area,” she said. Among the most popular misconceptions about reverse mortgages, Van Sickler explained, is the homeowner loses title to their home and they wind up owing more than their house is worth. Another misconception, she added, is that the homeowner’s heirs will have to pay the balance of the loan when the homeowner dies. “That is all wrong information,” Van Sickler stressed, “A reverse mortgage is a collateral loan. The homeowner is getting money out of their property, so they just don’t have to make monthly payments on it. They don’t lose the title to their home and their heirs aren’t stuck having to pay off a balance when they die.” What’s more, says Van Sickler, since the homeowner doesn’t make monthly payments, there are no payment due dates they have to hit, and the homeowner can stay in the home as long as they’re able. “It’s a loan without recourse,” says Van Sickler. “Not only does the homeowner retain title to their home, they don’t make any monthly loan payments. Also the homeowner never owes more than what the home will sell for,” she said adding that the applicant’s home is appraised when they file the mortgage applications. Another feature of reverse mortgages that appeals to homeowners age 62 or older is they don’t have to take the loan on the entire value of the home. Van Sickler explained the percentage the homeowner is entitled to borrow is based on as calculation of various factors, and since it’s a collateral loan the homeowner isn’t qualified on income and there’s no credit check. Homeowners can either take a lump sum payout or access a line of credit. She emphasized though that “it’s a conservative amount” because the borrower has to take into account the accruing interest and closing costs into the loan amount. Despite the many upsides to reverse mortgages, Van Sickler stressed that a reverse mortgage isn’t for every homeowner age 62 or older because the closing costs can typically run around $10,000. “Sometimes a 10-year fixed-rate loan is the best thing for them,” she says. “Their home may be the only asset the member has to draw from, so they have to look at all the factors.” -

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