If you’re 62 or older, there’s never been a better time to let the equity in your home, work for you. You’ve worked hard to build and maintain a safe, secure financial future through home ownership. Now it’s time to relax and enjoy some of the things you’ve looked forward to, but could never afford.
A Reverse Mortgage makes everything possible.
What is a Reverse Mortgage?
A reverse mortgage lets you use the equity from your home as loan collateral for anything you want or need. This may include day-to-day living expenses, vacation, cars, medical expenses, or home remodeling. Usage is not limited, (unless you opt for a single-purpose reverse mortgage), and monies may be dispersed to you in one of several different ways, including lump sum, monthly payments, or a line of credit which allows you to draw any amount until the LOC is exhausted. Once you vacate the property, (either through the natural course of death or a move to another residence) the money gets repaid to the lender with interest.
Benefits of a HECM, (Home Equity Conversion Mortgage) or Reverse Mortgage include the following:
- Money can be used for multiple purposes
- Competitive interest rates apply
- Loan term exists for the remainder of the time residing in the home
- FHA-backed reverse mortgages available
- Proceeds are tax-free
- Loan payoff will not exceed home value
- No penalty for early payoff
- No payments necessary while residing in the home
- Multiple means of disbursement of funds
- Full ownership of the property is retained by the borrower
- Many owner-occupied residential properties are eligible including foundation built one-family homes, modular homes newer than 1976, residential properties containing 2-4 units, condominiums, and townhouses
Myths and Misconceptions
Contrary to popular belief, a reverse mortgage allows you the financial freedom to live life on your terms while remaining in your home as long as you wish. Unfortunately, much has been said about reverse mortgage loan programs that is simply inaccurate.
Common misperceptions include:
1. The bank buys the home from the borrower.
At no time does the bank wish to hold or purchase real estate from a mortgagee. In the case of a reverse mortgage, the homeowner retains the title to the property and a lien is placed on the home by the bank as a guarantee of payment.
2. The home cannot be passed to heirs.
Heirs to the estate may inherit the property as usual when the owner is deceased. A lien for the total amount of the reverse mortgage including any accrued interest and mortgage premium insurance must be satisfied, however. Because a reverse mortgage is a “non-recourse” loan, the borrower will never owe more than the balance of the loan or the home’s value, (whichever is less) and no other asset will be attached to the loan. In essence, the bank may only foreclose on the property to collect on the debt. They cannot seize other assets such as, autos, bank funds, or other real estate. Any deficiency as a result of foreclosure is not charged to the borrower as well.
3. The borrower could be evicted from the home.
The reverse mortgage was designed to allow seniors to stay in their homes for the remainder of their lives. As long as the terms of the loan are met, the borrower can pay required property taxes and insurance premiums and properly maintain the home per FHA requirements, there is no threat of eviction.
4. The homeowner may outlive the reverse mortgage.
The loan becomes due only after the death of the borrower, or vacation of the property for 12 consecutive months.
5. Fixed income benefits such as, Social Security and Medicare will be affected by a reverse mortgage.
Because Social Security and Medicare are not need-based programs, they are not affected by a reverse mortgage. Some government benefits such as, Medicaid may be impacted, however.
6. The borrower pays income tax on the reverse mortgage.
Payments or payouts from a reverse mortgage are non-taxable and not classified as income.
7. Large up-front fees are required for a reverse mortgage.
Most closing costs and related fees can be rolled into the loan and financed.
8. A reverse mortgage is no different than a home equity loan.
While both loans use the home’s equity as collateral there are many differences including loan term, eligibility, disbursement of funds, and interest rates.
Discover the possibilities with a reverse mortgage today!