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By Sandra Block, USA Today 8/1/03 (Partial reprint)
Dorothy Rogers, 84, can't imagine ever moving out of her home in Hampton, N.H. She helped her husband, John, build the single-story house in 1955, supporting the boards while he nailed them in place. "I held every piece of this house," she says.
Now the house is supporting Dorothy. The $631 monthly payment from her reverse mortgage has allowed her to remain in her home, pay for her prescription drugs and see an occasional movie. Before she received the loan two years ago, she was struggling to bet by on her monthly Social Security Check, her only source of income since her husband's death in 1976. "The reverse mortgage was a blessing, "
A reverse mortgage allows homeowners like Rogers to earn tax-free income by tapping the equity in their homes. Unlike other kinds of home loans, the loan doesn't have to repaid until the homeowner moves, sells the house or dies.
As the name applies, a reverse mortgage is the opposite of a traditional home mortgage. With a traditional home mortgage, you borrow a specific amount and pay it back every month, gradually increasing your equity and reducing the size of your loan. With a reverse mortgage, a lender makes payments to you, based on the equity you've accumulated in your home. Over time, your equity decreases and the loan increases, although it can never exceed the value of your home.
While still only a narrow slice of the home loan market, the reverse mortgage business has skyrocketed. Financial Freedom, the USA's largest lender of reverse mortgages, says it funded about $6,000 reverse mortgages in the first six months of 2003, up 80% from the same period last year.
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