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Reverse Mortgage Loans

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With an aging population, limited retirement savings and home equity at an all time high, now is a great time to look into this unique lending program.

Sustainable long-term retirement

Reverse mortgage loans are a great financial resource that has enabled seniors age 62 and over to use their home equity to sustain long term retirement while maintaining residence in their home. The program began in 1988 as part of the Housing and Community Development Act. Since this time, the program has undergone many changes. Most of these changes are designed to protect the consumer and the overall health of the Mortgage Insurance Fund from FHA.

Here are a few of these recent changes that bring increased safety and security to the HECM (Home Equity Conversion Mortgage) program:

1. Non-borrowing spouse: As of today, if you’re married, both individuals need to be accounted for in the underwriting decision of a reverse mortgage. That was not the case prior to 2015.

2. Income and credit underwriting:  This will now minimize tax and insurance defaults and help to ensure the desired loan is a positive benefit for the borrower.  

3. Limitations on cash out in the first year helps provide long-term sustainability for the reverse mortgage borrower by providing access to future funds while slowing the depreciation of the equity position in the home.

4. The new version of a FHA HECM Reverse Mortgages for wealth management firms is that the “Highest and Best” use of the HECM is to improve a client’s retirement plan, not rescue it.


Use a reverse mortgage loan to purchase your next home

Did you know that reverse mortgages can be used to purchase a home?  For borrowers age 62 and over, reverse mortgages are another option to fund a new home purchase.  Instead of selling your current home and paying 100% cash for a new home, you can invest some of your proceeds in combination with a reverse mortgage to fund the remaining amount.  Your new reverse mortgage won’t require any monthly payments – you’re only responsible for property taxes, homeowner’s insurance, any HOA dues, and upkeep and maintenance of the home.   


Use a reverse mortgage loan to access equity in your current home

There are three ways to access the equity in your home through a reverse mortgage:

  1. Line of Credit
  2. Lump Sum
  3. Fixed Monthly Payments
Important facts about the reverse mortgage loan program
  • The loan is due when the last borrower passes away or moves into a long term care facility for 12 consecutive months with no prospect of returning back to the home.  The loan will also be due if you decide to move to a new residence, sell the home, or refinance.
  • Borrowers are still obligated to keep up with paying property taxes, maintain and pay for a homeowner’s insurance policy on the property, and continue to maintain the home in good condition.
  • Homeowners or heirs never owe more than the home is worth.  The FHA mortgage insurance is in place to pay any difference between the loan balance and what the home is worth if the balance exceeds the home value when the last borrower leaves the home.  This insurance is paid as an upfront fee when the loan is taken out, as well as a monthly fee that accumulates along with the interest on the loan.
How can a reverse mortgage loan supplement your retirement funds and improve your finances?
A reverse mortgage reduces your out of pocket expenses by eliminating the need to make a mortgage payment each month.  A mortgage or housing payment is often our largest expense.  That money can be put toward other living expenses, travel, or be saved for future needs.
By choosing the option for fixed monthly payments, you can supplement your monthly income and increase your budget for everyday expenses.
If you have enough regular income from a pension, social security, or other investments, the credit line option will be available to you for larger expenses or unexpected bills.  As an added benefit, the credit line will grow each month.
If you have a need for a larger lump sum when the loan is taken out, you may also access a lump sum in the first year of your loan.