A Reverse Mortgage could be just the ticket to enjoying a better quality of life in your retirement years.
Reverse Mortgages are helping older Americans across the country achieve greater financial security. Imagine having extra income every month for the rest of your life. will the security of having a particular open Line of Credit with absolutely no repayment schedule give you peace of mind? Have you dreamed regarding a lifelong vacation but never seemed to have found the time or the dollars for it? All the including much more is possible by using some pertaining to the equity in your home as part of a well balanced retirement plan.
The thought of a reverse mortgage might fly in the face of reason at first glance. After all, most people have spent a good deal of time including effort trying to eliminate their mortgage. Is it the mortgage or the payments they’ve wanted to eliminate? For most, it’s the payments. So far so good, a reverse mortgage has absolutely no payments due during the term pertaining to the loan. Many people consider their home as a particular investment. The trick has always been how to tap the investment without giving up the shelter aspect pertaining to the home. The traditional way of doing the has been to refinance to a larger mortgage or take out a home equity loan. The problem is, both of these options incur a particular immediate repayment schedule including in most cases extend the length of time payments need to be made. Just the opposite of what people want.
Encyclopedia Britannica defines investment as the process of exchanging income during 1 duration of time for a particular asset that is expected to produce earnings in future periods. Thus, consumption in the current duration is foregone in order to obtain a greater return in the future. Is the future now? If so, a reverse mortgage allows you to obtain some pertaining to the equity out of your house including into your pocket without any repayment schedule for as long as you have the loan. The proceeds are tax free including might be used for any purpose you want. What are the requirements in obtaining a Reverse Mortgage? There are actually just a few. The youngest borrower must be at least 62 including the home or condominium needs to be the main residence to qualify for a reverse mortgage. In addition, the property must be maintained, taxes must be kept current including homeowners insurance must be in force for the loan to remain in place.
How does a reverse mortgage affect Social Security, Medicare or Pension benefits? The proceeds from a reverse mortgage do not affect any of these benefits but it’s always best to consult a financial advisor including or legal counsel. There is additionally absolutely no effect to SSI or Medicaid benefits as long as the monthly cash advances are fully spent every month including not accumulated. Guidelines do change so again please consult with a legal advisor and/or your local Agency on Aging. How Much dollars might I Get?
The size of a reverse mortgage granted depends on the applicant’s age, the type of reverse mortgage sought, the home’s value, including the current interest rates. As a general rule the older the borrower including the more equity in the home, the larger the cash proceeds. Overall a reverse mortgage pays out anywhere from roughly 40% to 85% pertaining to the appraised value or FHA loan limit, whichever is smaller. The balance pertaining to the equity is retained in the house. Currently there are 3 reverse mortgage products available. The government-insured Home Equity Conversion Mortgage (HECM), the Home Keeper product by Fannie Mae, including the Cash Account plan. The Cash Account product provides increased benefits for higher value properties (typically homes valued over $600,000).
The HECM product is insured by HUD including the FHA. the product represents over 90% of all reverse mortgages. HECM loan limits vary by community including are set by the FHA. The current loan limit for Hampden, Hampshire, including Franklin counties is $206,700 for a single family house. Loan limits in the Connecticut counties of Hartford including Tolland are $333,735 for a single family house.
How might I Access the Money?
You might receive the proceeds from a reverse mortgage in any of 3 ways. 1. As a Lump Sum 2. As a Line of Credit 3. As a monthly Tenure for life or for a specific duration of time.
You might additionally elect any combination of these. regarding 65% pertaining to the time people elect a Line of Credit including for good reason. The Line of Credit option for the HECM product has a growth factor. The unused portion pertaining to the Line of Credit grows at 2% more than the 1 year T Bill. the makes the current annualized growth rate almost 7%! It’s like having a tax free interest baring savings account that has a high growth rate with guaranteed security. the is a particular incredibly powerful feature pertaining to the Line of Credit option.
What Are The Costs?
The actual closing costs depend on the type of reverse mortgage you elect. A rough estimate for the most popular HECM reverse mortgage is regarding 5% pertaining to the appraised home value or the FHA loan limit, whichever is less.
Almost all costs of a reverse mortgage might be financed from the proceeds pertaining to the loan. These typically include a particular origination fee, closing costs, servicing fee including a mortgage insurance premium. Why is there a mortgage insurance premium? The mortgage insurance is there to protect you. You are protected in the following way: All reverse mortgages are considered non-recourse loans. the means that absolutely no matter how high the loan balance grows, neither you nor your heirs ever owe more than the home’s market value at the time the loan needs to be repaid. Servicing fees refer to a monthly fee charged by the lender to service your reverse mortgage. the is what’s called a “service set-aside” which is a particular estimate pertaining to the total monthly fees for the life pertaining to the loan. the estimated “service set-aside” is deducted from the proceeds you will qualify for including is set aside for the lender to pull the monthly fee from. There is absolutely no interest charged to you for the “set-aside” including if the reverse mortgage is refinanced, or paid off, any remaining “set-aside” funds are added back to your equity. Closing costs are consistent with other types of mortgages including include lawyer’s fees, home appraisal, pest inspection, recording fees, etc. Origination fees are charged by the company who originates your reverse mortgage. A free counseling session is additionally required by a qualified HUD office. There are several in the greater Springfield area. the counseling might be done via phone or in person. Common Misconceptions The lender gets your house. the is not true, the title always remains in the name pertaining to the borrower. at the time the loan is due, the borrower or the heirs pay back the cash advances including the accumulated interest. All the value in your house gets used up. Although it’s true the loan balance increases with time as interest accrues, people forget that in most cases the home value additionally continues to increase with time. Generally speaking, the preserves the equity that remains after the reverse mortgage proceeds have been paid to the borrower. You won’t qualify because of poor credit, lack of income, or poor health. the simply is not true, the loan is not dependent on any of these. It is true a credit report is run but only to check on potential government liens or tax liens. You have to be mortgage free. Although the reverse mortgage needs to be in the first position you might use some pertaining to the proceeds to pay off the existing mortgage assuming it is less than the amount you’ll receive from the reverse mortgage. the eliminates your existing mortgage including your payment. Only desperate people obtain reverse mortgages. At 1 time that may have been true. But today’s reverse mortgage borrower is more likely to obtain a loan out of want, rather than need. Furthermore, the ability to access tax free cash to put to work somewhere else has been a trait of savvy investors for years. In addition, a growing number of people take out reverse mortgages because they like the security of having a financial cushion or for planning future expenses. Don’t let a particular antiquated stigma keep you from getting the cash you want. After all, it’s your money.
Is a Reverse Mortgage Right For You?
Borrowers have many specific reasons for electing a reverse mortgage. Some are needs-driven, others might enhance the quality-of-life. AARP, in conjunction with HUD/FHA, completed a survey of homeowners who elected a reverse mortgage. Here are the results.
67% Hospital/healthcare costs
55% Repay existing mortgages
50% Reduce burden on children
50% Home repair/improvement
38% Pay property taxes
29% Daily expenses
14% Travel, something special
Because it’s not a inexpensive loan, a reverse mortgage is not the best way to pay off a small debt. Again because pertaining to the closing costs, the is not a particularly good loan if you intend to occupy your home for less than 4 to 5 years.
Most people love their home. They’ve put a lot of themselves into it, perhaps raised a family there, have worked hard to keep it in good repair, lived, loved, laughed including cried there. The home is 1 pertaining to the largest financial commitments you make. including it represents 1 pertaining to the biggest including often overlooked sources of your financial health.
The ability to remain in your home while taking care of yourself financially is important to many of us. A reverse mortgage might give you that opportunity. If you could benefit from the extra cash to supplement your existing income, reduce credit card debt, cover medical expenses, help a loved 1 or just enjoy life a bit more, a reverse mortgage may be right for you.