The FHA Reverse Mortgage, also known as a Home Equity Conversion Mortgage (HECM)You Can Use Your Home to Supplement Your Retirement Income.
The FHA Insured Reverse Mortgage
Reverse Mortgages are growing in popularity, and with 10,000 baby boomers going into retirement every day the program is just getting bigger and bigger. Today’s reverse mortgage is not yesterday’s reverse mortgage. There is government insurance that keeps you or your heirs from ever owing more than the home is worth. That means if the real estate market plummets you are still safe. This means the FHA reverse mortgage is a non-recourse loan. Additionally lenders are now required to ensure that the senior adult has adequate income to keep up with the property taxes and home owners insurance. Those two items are your only obligation to pay out of pocket when you get a reverse mortgage.
How does it work? It’s actually pretty simple, whatever you borrow you don’t have to pay back while you are alive or living in the home as your primary residence. You only pay it back upon the passing of the last person on title or if you move from the property. In both cases you would sell the home to pay the loan back. The amount borrowed grows against the remaining equity in the the property. Additionally your heirs have the right to refinance the debt or pay it off with any other proceeds from your estate if they choose to keep the home. So the balance grows against the remaining equity, but even if 25 years down the road the balance grows higher than any remaining equity, nobody owes that anything above the value of the home, that’s what the mortgage insurance is for.
The bottom line is seniors are now utilizing the reverse mortgage or Home Equity Conversion Mortgage (HECM) as a tool to supplement their retirement. How does a paid for home help you now? It doesn’t, it could only benefit your heirs and most children want to see their parents comfortable in retirement. There are other ways to make sure you leave a legacy than leaving a house that often gets sold upon passing anyways.
How Much Do I Get?
How much you get out of your house depends on the age of the youngest person on title and the type of reverse mortgage you get and the value of your home. A fixed rate mortgage allows you to get the most up front. A line of credit allows you to take a certain percentage at closing and then after 12 months allows you to get more, in total more than the fixed rate lump sum. This type of reverse mortgage is quickly becoming the most popular. Call us and we can let you know how much you could get from your home. We believe in a no pressure sales strategy, our goal is to educate and serve you.
How Can I Get My Money?
This is where you have lots of options with a FHA insured reverse mortgage. You can get payments for life, payments for a certain period of time, a lump sum, or even just create a line of credit that’s available to you in the event you need it. You can also do a combination of these options. Its truly an incredible tool that can act as annuity, that’s why we always warn you if someone is trying to sell you an annuity with the proceeds. The reverse mortgage can actually act as annuity with tenure payments guaranteed for life.
Can I Pay Off My Existing Mortgage?
You can absolutely pay off your existing mortgage with a reverse mortgage. In fact oftentimes that’s where the most relief is found. When you are on a fixed income and the weight of that monthly payment is weighing you down, getting it completely eliminated can be a huge relief. Even if you have a home worth $400,000 and you still owe $200,000, it could take you years to pay off the rest of that loan. You could be paying $1,500 a month. With a reverse mortgage we can make that payment disappear. That’s just an example, but you get the idea.
How Do I Get Started?
The first thing to do is to call a reverse mortgage lender like Coast 2 Coast Lending and speak to someone who has experience with the program. You need someone with experience who can put together a reverse mortgage proposal for you to review and the explain the program. Additionally the government has set up a requirement to get a counseling certification from a third party provider to ensure you understand all of the ins and out of the program. That makes them feel better and it makes me feel better. The counseling is over the phone and I would provide you with a list of providers. Most people finish the counseling understanding just how powerful a reverse mortgage really is. From there the application process can start.
Will My Financial Adviser Like This Idea?
Every financial adviser I explain reverse mortgages to learns to love reverse mortgages. Usually the ones that don’t like them just don’t really know about them. Converting your home equity into usable income for your retirement is truly a brilliant use of your resources. Its not for everyone, but I can tell you that seniors with homes ranging from $50,000 to $4,000,000 are using this program. Its just about using it wisely to supplement your retirement income and lifestyle. You can even use a reverse mortgage to buy a home. For more info on reverse mortgages call us or visit HUD.GOV