A Reverse Mortgage removes financial stress because, unlike other mortgages, no payment is due until the home is no longer the primary residence of the borrower. So borrower(s) are not required to make monthly payments.
Income and credit is not considered when determining whether one qualifies for a Reverse Mortgage. One qualifies if they are 62 or older, owns their home, occupy and intend to occupy the home as their primary residence, and has enough equity to pay off any current mortgages or liens if any. So if one has a fixed income and/or their income is low, along with meeting the above listed qualifications one can qualify for the Reverse Mortgage. Even with poor credit, or a bankruptcy, and/or one is in foreclosure, if the above listed qualifications are met they may qualify for a Reverse Mortgage.
The Loan is non-recourse, there is no personal liability. The borrowers or their heirs are never required to pay more than the value of the home. The mortgage is only on the property and is not the liability of any person. So if one stays in their home a long time and the balance due is more than the value of the home, the borrower or their heirs are not responsible for the difference in payment of the debt. The same is true if the property value decreases.
Larger percentage of funds can be accessed the older a person.
The Line of Credit grows on the HECM, making more funds available for future use.
The proceeds are tax-free* and Social Security and Medicare are not affected because it is a loan against the property so the proceeds are not considered income. *consult a tax advisor
The interest rate is usually lower than with a conventional mortgage. The initial interest rate on the HECM monthly adjustable rate program (the most common Reverse Mortgage program) is based on the one-year U. S. Treasury plus a margin. In the last several months the initial interest rate has been under 5.5% or lower. The Fannie Mae interest rate has been 7% or less for the last several months.
There are no restrictions on how the proceeds can be used.
Borrower can stay in their home as long as they choose and access the cash now.
Bill and Phyllis were preparing for the future. They did the Reverse Mortgage to pay off their current mortgage, the credit card debts, and to have money in their line of credit. With the money in the line of credit when one of them passes away, the other would be able to change the payment plan to receive monthly payments and continue to live the lifestyle they are currently accustomed to, even without the Social Security of their spouse.
The closing costs can be perceived as high. As with a regular mortgage, the costs associated with the Reverse Mortgage include the appraisal, origination fee, title insurance, escrow, and recording fees. The FHA plan includes a 2% initial mortgage insurance premium. Although not an initial cost, another cost is a monthly service fee. Since one is not making monthly payments, at the time of closing, a lump sum is set aside from the maximum principal loan amount. Each month the service fee is taken from the amount that has been set aside.
Although the costs associated with the Reverse Mortgage are included in the loan, they are paid up-front through the loan proceeds. Because they are paid up-front, the shorter period of time one keeps the loan, the more expensive it is as an annual rate. The longer one keeps the loan, the less expensive it is as an annual rate because the costs get averaged over the life of the loan.
When the home is sold there will be less equity for the borrower or their heirs.
The debt is rising and the equity may be decreasing because one is not making payments. If the equity is used through the life of the loan and one lives long enough, there may not be any equity remaining when the loan balance is paid.
Borrowers feel the positives outweigh the negatives because they want to live comfortably, have some "elbow room," and be independent with financial peace of mind without being burden on their children. Usually the children are doing fine on their own and want their parents to eliminate their financial worries and enjoy their life more fully.
You've worked hard for your home, now let it pay you.
Call us to see if the positives outweigh the negatives in your situation.
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Bill and Phyllis were preparing for the future. They did the Reverse Mortgage to pay off their current mortgage, the credit card debts, and to have money in their line of credit. With the money in the line of credit when one of them passes away, the other would be able to change the payment plan to receive monthly payments and continue to live the lifestyle they are currently accustomed to, even without the Social Security of their spouse.
To have Security, Indpendence, Dignity, and Control
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