The Reverse Mortgage Program: The term "reverse mortgage" is the popularized version of a program for senior homeowners who wish to withdraw a portion of their home's equity for their use. The term is exactly what it means. It is the reverse of how a typical mortgage works. But the only reverse mortgage insured by the US Federal Government is called a Home Equity Conversion Mortgage (HECM) and is only available through an FHA approved lender.
These days, many people are talking about mortgages and interest rates. And they are also talking about reverse mortgages. After caring for their homes for many years, many senior homeowners are still investing in a home that has never paid them back. A reverse mortgage is a way to glean equity from your home, turn into tax free cash, and do it without having to pay monthly mortgage payments.
"Why not let your home pay you back?" Perhaps, this is a concept you've never considered. Some of our senior homeowners here on Long Island refer to themselves as being "house rich and cash poor". This is not unusual for the Long Island area or with other areas across the country.
Over the past fifty years, ever since the very first reverse mortgage closed, reverse mortgages have been enhanced to provide all the safeguards you'd want in a mortgage. There is a line of credit feature with a growth rate on the money so you can use your money whenever you need it. No interest will accrue until you access the line of credit. Also available is the HECM for Purchase program for those wishing to buy a home with a reverse mortgage. If you are not interested in a reverse mortgage, Advisors Mortgage can offer you a host of different mortgage programs to suit your needs. Let us know what you are looking for, and we'll help you find the perfect fit for all your mortgage needs. We truly care, and that's the Advisors Mortgage difference.
"NO ONE CARES HOW MUCH YOU KNOW UNTIL THEY KNOW HOW MUCH YOU CARE." Theodore Roosevelt
According to the National Council on Aging, one third of senior households have no extra cushion at the end of the month and may be in debt after meeting essential monthly expenses. It's often referred to as "more month left at the end of the money". What is the one of the biggest problems facing many baby boomers today? There's not enough money for retirement. We don’t know about you, but this is hardly the retirement lifestyle many seniors have dreamed about.
Many reverse mortgage borrowers testify to the relief they find after ridding themselves of their monthly mortgage payment. They never have to worry about late or missed payments. Some reverse mortgage borrowers enjoy traveling and having the freedom that comes with a reverse mortgage while others use the money for in-home care and medical bills. It all depends on your situation. Let's review some information about reverse mortgages.
Just What is a Reverse Mortgage?
A reverse mortgage or HECM, which stands for Home Equity Conversion Mortgage, is a special type of loan which enables homeowners age 62 and above to convert part of the equity in their home into tax-free cash without having to sell the home, give up title, or take on a new monthly mortgage payment. A reverse mortgage will not affect Social Security or Medicare, and there are no health qualifications or stipulations on the use of the proceeds. And although no mortgage payments are required, you are free to make mortgage payments any time.
Currently, the reverse mortgage that is available is the Home Equity Conversion Mortgage (HECM) which was created by the federal government and is managed by the Department of Housing and Urban Development (HUD). These loans are insured by the Federal Housing Administration (FHA) and require that all borrowers:
* Be at least 62 years of age at closing and own their home
* Reside in a single family home as their primary residence (1-4 units, FHA approved condos, PUDs, manufactured homes, some mixed-use & commercial)
* Receive HUD-approved reverse mortgage counseling
* Not be delinquent on any federal debt
If your home is valued at over $500,000, there is a JUMBO reverse mortgage option available. A reverse mortgage comparison will outline which program is best for you. (SEE BELOW FOR JUMBO REVERSE MORTGAGES)
With the HECM (reverse mortgage), you may be able to pay off credit card debt and even a current mortgage. Wiping out a monthly mortgage payment puts a smile on anyone's face. It's your money to use as you wish. It's your equity. Ask yourself if having more spendable cash would change your life for the better. I am sure the answer is "YES"!
Have you been putting off traveling or buying a new car or visiting the kids and grandkids? A reverse mortgage can change your financial picture with either a cash out sum or a monthly stipend that arrives in your bank each and every month. You can also establish a line of credit (depending on the amount approved) or a combination of all three.
Many reverse mortgage borrowers renovate their homes with their reverse mortgage proceeds while others help grandchildren with college expenses. It all depends on your needs and desires. In-home care can also be paid for with your proceeds. It's up to you to spend your proceeds to your benefit and maximize your cash out.
So you're thinking about a reverse mortgage, but you've got more questions than answers. You have come to the right place. Advisors Mortgage has helped senior borrowers and all borrowers achieve many of their financial goals. Whether a reverse mortgage or a conventional mortgage, we'll help you with the process.
People say LOTS of things about reverse mortgages, and many have gotten it all wrong. Erroneous information however well intentioned doesn't help. The BEST way to find out if a reverse mortgage is right for you is to get the facts from a duly licensed Reverse Mortgage Specialist. You will see firsthand which option is best for you.
Reverse mortgages have become a popular tool for retirement planning for those homeowners who have significant equity in their homes There are no restrictions on how your reverse mortgage proceeds can be used, after all, it's YOUR money. Your proceeds can be considered a retirement plan sitting under your roof just waiting to be used.
Is it considered taxable income?
Absolutely not! It's a mortgage, it's your equity (tax free) so it's not considered income. Who does a reverse mortgage? You may have heard otherwise, but everyone who does a reverse mortgage does not have to be destitute. Many borrowers simply wish to supplement their income so they are free to enjoy their retirement to the fullest. In a word, a reverse mortgage is freedom, freedom to do what you want with the equity in your home.
A lot of seniors today are dependent solely on Social Security and their pension but have no other resources to fall back on, therefore, a reverse mortgage can make all the difference in the world.
MAXIMUM BORROWING AMOUNT
The Maximum Claim Amount or amount you can borrow for the FHA HECM is currently $765,600 but will increase to $822,375 in 2021 regardless of where the property is located. The amount you receive (known as the Principal Limit/before closing costs) is based on the age of the youngest borrower, the appraised value of your home, your available equity, and current interest rates. So you do not receive ALL of the Maximum Claim Amount. But the great thing about a reverse mortgage is the older you are, the more money you receive.
Jumbo Reverse Mortgages are a good option for higher value homes. Minimum home values are $500,000 with a max loan amount of $4,000,000 and max home values of $10,000,000. One to four family homes are eligible for this program. Closing costs are lower than the traditional FHA HECM, but rates are usually higher. You can refinance or purchase a home with a JUMBO Reverse Mortgage.
Please call Advisors Mortgage with any questions you may have or to receive a free proposal. ( NOTE: Jumbo products and commercial loans are arranged through third party providers).
