Following is a compilation of questions we hear all the time and responses. This may be useful as you begin the educational process learning what a Federal Housing Agency (FHA) approved Home Equity Conversion Mortgage (HECM) is and how a reverse mortgage might fit with your retirement planning.
There will be other questions that may not have been covered so please reach out to us with any questions and we will be happy to get help in any way that we can.
Reverse mortgage proceeds are based on the age of the youngest borrower; the appraised value of home; current reverse mortgage interest rates and the balance of the existing mortgage on your home. Also, a factor is the mortgage loan limit currently $822,375. Starting with a “maximum claim” based on these factors, the amount you would be eligible for is reduced to allow a reserve set aside for future interest and mortgage insurance payments resulting in the principal limit you will have access to.
To qualify for a reverse mortgage, one borrower must be at least 62 years of age, owner of home and occupy it as their primary residence (among other requirements). If you have equity in your home and are looking for additional income or a line of credit for reserves, a reverse mortgage can provide the funding needed to allow you to stay in your home. Qualifying requires a financial assessment making sure that you have the ability in the future to maintain the home and pay the property taxes, homeowners insurance and any other fees such as homeowner association dues. This assessment will also make sure there is enough left over to support your household!
Proceeds may be provided through:
- A full or partial lump sum
- A growing line of credit (unused balance grows based on unused interest and the monthly mortgage insurance previously reserved)
- Monthly payments (tenure or modified tenure plans available)
- Combination of any of these
- Fixed rate loan will require all proceeds to be taken at closing
The choice is ultimately yours, but we will help guide you through the disbursement option that is best suited for your situation. It is important to note that if you choose a line of credit and/or monthly payments – you can update those choices as your needs change.
Having a reverse mortgage increases your financial flexibility and choices. It can help monthly cash flow by eliminating a traditional mortgage payment or supply monthly cash from the reverse mortgage. Important details – You will never owe more than the future value of your home. As long as you comply with the loan terms, you don’t have to make payments on the loan*. With a reverse mortgage loan, you will not lose Social Security or Medicare benefits. Reverse mortgages afford you a greater financial freedom and control, providing you with the dignity and security you deserve.
* The borrower must meet all loan obligations, including living on the the property as the principal residence and paying property charges, including property taxes, fees and hazard insurance. The borrower must maintain the home.
NO! When properly used, a reverse mortgage is a very powerful, viable and strategic financial tool. There is no better product more readily available to the senior population in terms of supplementing retirement, balancing a portfolio and managing retirement risks. That being said, a reverse mortgage should be evaluated based on your particular needs and financial goals. Your Signet reverse mortgage partner can help guide you through your specific situation.
With a reverse mortgage, there are no monthly mortgage payments as long as property taxes, insurance and maintenance continue to be paid. Many seniors are resistant to the idea of selling the home they’ve lived in for years. A reverse mortgage is a convenient and flexible solution. You can stay in your own home that you are comfortable living in while enjoying an additional cash flow stream to cover health care costs or other expenses to help you live well with greater flexibility and choice.