Reverse Mortgage Loan Advisors has been designed to educate the public about the FHA insured Home Equity Conversion Mortgage, AKA, a reverse mortgage in layman’s terms. The intent is to provide unbiased information on the subject………………the good, the bad, and the ugly.
What is a Reverse Loan?
It is an extremely safe, federally insured loan program specifically designed for homeowners that are aged 62 or older. It’s meant to allow you to tap into a portion of the equity in your home and
convert it to tax free cash (always check with your tax professional).
The beauty of this program is that there is no required monthly payment to the bank for as long as you live OR for as long as you choose to live in your home.
To clarify, we stated that there is “no monthly payment to the bank required”. Here is why; the loan proceeds that you use don’t get paid back until you pass away or until you leave your home permanently and sell your home (or refinance the loan).
However, when you do this type of loan, it’s just a loan on your home. You still own your home and the bank does not go on title. Since you still own your home, you will have to pay your taxes and insurance just like you probably already do.
More questions, contact Reverse Mortgage Loan Advisors. Info@ReverseMortgageLoanAdvisors.com
How does A Reverse Mortgage Loan differ from a traditional mortgage?
There are three primary differences:
As previously mentioned, there is an age requirement. For traditional loans, you just have to be old enough to enter in a legally binding contract (i.e. age 18) and then there is no age limit for a regular mortgage.
In the reverse world, you have to be aged 62 or older. If you are married, just one spouse needs to be old enough. Your spouse can be any age and you both can live in your home for the rest of your lives. Note; your younger spouse just needs to be at least age 18.
The second difference is that there is an equity requirement. You can borrower anywhere from 52.4% of the value of your home to 75% (up to the HECM max claim amount / loan limit of $636,150.00). If you are age 62 you get 52.4% and it moves on a sliding scale up until age 90 where you get 75%. If you are married to an individual that is younger than age 62, you won’t be able to borrow quite as much.
The 3rd difference was already mentioned and it’s the best part. There is no monthly payment required for as long as you live or for as long as you reside in your home. However, you can make a monthly payment if you so choose.
There are other differences, but these are the main 3 that set it apart. For example, one might wonder what the Reverse Mortgage Credit Requirments are. This we’ll cover in detail on separate posts or you can simply contact Reverse Mortgage Loan Advisors. Info@ReverseMortgageLoanAdvisors.com
Key considerations pertaining to Reverse Mortgages:
Here are a few things you should ask yourself if you’re thinking of doing this type of loan:
You should ask yourself what “you are hoping a reverse mortgage will do for you”. Or, Good Reverse Mortgage Loan Advisors should be asking you this. Since there are quite a few ways to structure this program, It’s important know what you’re hoping to accomplish with a reverse mortgage. For example, are you just looking to eliminate your monthly payment? Are you looking to pay off credit cards or an auto loan? Are you looking at just simply putting a standby Line of Credit in place that grows over time so that when you need the money, you can quickly access it easily? There’s plenty you can do, and the aforementioned are just a few of the things you can do with a HECM.
Who am I leaving my home to?
Are you concerned with the legacy you leave for your kids? Basically, if you do a HECM you will have less to leave your kids than if you own a free and clear home.
What is my plan In terms of how long I’d like to remain in my home. If you’re planning to move out in the short term (like 6-18 months), perhaps this isn’t the best option (although it could be). Is your plan to live in your home until the day you die? Maybe this could be a good financial tool for you to utilize.
Is there more month than money?
In other words, do you typically deplete all your earnings every month OR are you taking money from other assets such as savings?
Do you get any sort of financial assistance?
Do you get any government assistance (besides Social Security income and Medicare)? The loan proceeds you receive do NOT impact Social Security and Medicare. However, it could potentially impact other forms of assistance such as SNAP / Food Stamps, Cash Aid, etc..
Obviously, if you’re considering a Reverse Loan, you probably have some sort of goal in mind. What other strategies can you employ that would also allow you to accomplish your goal? For example, you can get a traditional loan. Perhaps you can go back to work. You can move. You can downsize your home. Weigh out what your best option is.
When I do pass away, what happens to my home?
This is a Good question, and that’s really determined by you. Hopefully, you’ve already prepared a Last Will & Testament or Life Estate, etc.. This tells the courts and surviving family members what you want to happen to your home after your death.
Typically, reverse loan borrowers will leave their home to their children. When their child inherits the home, it’s the heir’s responsibility to contact the loan servicer within 30 days of the event. The intent of this initial contact is to just let them know that the home is yours now. At that point, they’ll have anywhere from 6-12 months to handle the loan (up to 6-12 months).
Normally, the heirs will sell the home and pay the loan off with the proceeds of the sale and then the heir gets 100% of the remaining equity, less any closing costs associated with the sale (like Real Estate Agent commissions). Sometimes, the heirs will want to keep the home live in or use as a rental. In that case, they’d simply need to refinance the loan into their name (or pay it off with the cash you have, but not everyone has large chunks of cash available to do this).
Admittedly, this type of financing is not for everyone. Reverse Mortgage Loan Advisors is dedicated to providing the public with unbiased Reverse Loan Info (not just the pros or reverse mortgage, but also any reverse mortgage cons associated with it).
Want more info from Reverse Mortgage Loan Advisors? Info@ReverseMortgageLoanAdvisors.com
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