By Carolyn Fields, CRMP –
Convert part of the equity in your home into cash without having to sell the home, give up title or take on new monthly mortgage payments.
The Home Equity Conversion Mortgage (HECM) loan is the oldest and most common reverse mortgage and is an FHA-insured (Federal Housing Administration) program for homeowners age 62 and over.
We realize that your home is probably the largest asset you own and using its equity in a reverse mortgage requires serious thought. It may not be for everyone; however, a reverse mortgage is all about making the most of the equity that you have acquired. This popular home loan has been helping seniors for more than a decade and is usually supported and encouraged by the senior’s adult children.
How a Reverse Mortgage Works
Today’s seniors use reverse mortgages to make a difference in their lives. When you obtain a reverse mortgage, the title to the property remains in the borrower(s) name at all times. The seniors are able to capitalize on their home’s equity without having to move.
There are closing costs associated with a reverse mortgage. Appraisal and counseling fees are paid up front, and things like attorney fees, title insurance and FHA insurance premiums are deducted from the loan proceeds at closing.
There is no monthly mortgage payment required on the reverse mortgage. It is very important to note, however; that the borrower(s) will be responsible to pay the property taxes and the homeowner insurance on the property. The reverse mortgage is repaid when the senior(s) no longer live in the home as their primary residence (when the senior moves, sells or passes away).
How Much Do I Qualify to Receive?
The amount that the senior qualifies for is based on the age of the youngest borrower, the appraised value of the home and the current interest rate of the reverse mortgage. As long as you have enough equity in your home, you may qualify for the reverse mortgage. Basically, the older you are and the more valuable your home, the more money you can receive.
With a reverse mortgage loan, there is no term, which means seniors are able to stay in their home as long as they wish without having to sell, provided they pay their property taxes and homeowners insurance and keep the home in good repair.
The senior is able to take their funds from the reverse mortgage in several options. They can receive a lump sum, a monthly check, a line of credit to draw on as they wish, a regular payment as long as they wish, or a combination of these options.
If a senior has a traditional mortgage on their home already, it is still possible to do a reverse mortgage. We simply look at how much of a reverse mortgage they qualify for; the current mortgage would have to be paid off from that amount and the remainder would be the senior’s benefit. What ultimately would happen is that their principal and interest portion of the traditional mortgage payment would then become an addition to their monthly income because they would no longer be making that payment.
Social Security and Medicare income are typically not affected by a reverse mortgage because you are simply pulling equity from your home as income. It is suggested, however; to consult your tax advisor for full details.
How is the Reverse Mortgage Paid Off?
When a senior has obtained a reverse mortgage, it is not an obligation that is passed on to the heirs after the seniors have passed away. When the seniors have passed away, the loan will become due and the heirs can decide to sell the home to pay off the reverse mortgage. Once the property is sold, the reverse mortgage is paid off and any profit will go to the estate. If the heirs decide they would like to keep the property, then they would need to pay off the reverse mortgage.
The potential uses for a reverse mortgage are endless. With a reverse mortgage, you’re in charge! Some of my past clients have used a reverse mortgage to fund a variety of items such as supplement their retirement income, fund healthcare costs, purchase long-term-care costs, pay off a mortgage, pay property taxes and/or homeowners insurance, purchase a primary residence, purchase a vacation home, fund grandchildren’s college, start a business, or travel.
Reverse mortgages are not for everyone, however; in today’s economic times, many people are discovering that a reverse mortgage can be the key to financial security! Isn’t it time for you to find out if this loan can help you or a family member?
I am a CRMP, a Certified Reverse Mortgage Professional through the National Reverse Mortgage Lender Association. I am only 1 of approximately 40 such designees in the country. In obtaining this designation, it shows that I have demonstrated superior knowledge and competency in the area of reverse mortgages and dedication to uphold the highest ethical and professional standards in the business.
Free and Confidential Consultation
Call today for a confidential consultation or to learn about upcoming seminars at 352-753-0851 or email me at Carolyn.Fields@myfirstcenturybank.com, NMLS#323051.