What keeps you up at night?
What keeps you up at night? Financial stress and monthly cash-flow pressures create anxiety for a lot of folks. These financial pressures can be magnified when you are at retirement age. A solid financial plan can alleviate much of this burden, one of the potential options to help with this plan is mostly overlooked. And that option is a strategically implemented reverse mortgage. Reverse mortgages are a unique and powerful loan when understood, here are some facts about a government insured HECM reverse mortgage:
- Borrowers retain the title to their home (not the lender) and can remain there until they pass away or decide to move.
- Reverse mortgages are non-recourse loans, meaning that even if the property declines in value after the loan has been taken out, the borrower will never owe more than the value of the home. This is great protection for the homeowners and their estate.
- There is no-payment penalty on a HECM loan, you can pay it off at any time with no penalty, this is an FHA insured loan.
- Borrowers must undergo specific reverse mortgage counseling by an independent counseling agency before they can move forward with the loan.
- The amount of proceeds you can access depends on the value of the home, your age, and current interest rates. You cannot extract 100% of the equity when you originate this loan.
- Reverse mortgages do include FHA insurance premiums –there is an upfront amount as well as a much smaller annual amount. Interest accrues on a reverse mortgage and is paid for or settled when the loan is paid off at time of homeowner’s death or when they sell the property to move.
- When the borrower dies, the heirs have the option to repay the loan and keep the house. Or they could choose to sell the property, pay off the existing reverse mortgage and then walk with the remaining equity.
- Reverse mortgages are not all the same. There are different types of reverse mortgages that distribute the proceeds in different ways, and the fees offered by lenders vary.
- Reverse mortgages are not a loan of last resort. In recent years, they have been touted as a financial planning tool that can help homeowners leverage their resources to make the most of their wealth in retirement.
- You can purchase a house using a reverse mortgage. It’s called a HECM for Purchase, and it enables a homebuyer to buy a new house and obtain a reverse mortgage in one transaction and never make a monthly mortgage payment.
- Entitlement programs like Social Security and Medicare are not affected when you take a reverse mortgage, but programs such as Medicaid or other means-test programs can be impacted.
Financial pressures are never fun, especially at retirement age. Reverse mortgages are underutilized and underappreciated. Reverse mortgages can be a great tool to help create financial peace of mind from an otherwise dead asset…your home equity. Learn the truth about this unique and powerful loan, for the right people it is a game changer.
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