Reverse Mortgage Loan for a better retirement
A Reverse Mortgage Loan for Americans for a Better Retirement :
Reverse Mortgage Loan is solely dedicated
to helping older Americans use their home equity for a better retirement
For all that a home gives us-things like safety, stability, security and a place to create and store our memories-one gift we tend to overlook is the future it can also give us.
You can begin to unlock that future by using some of
your home's equity, which has likely increased over time, becoming your most
valuable asset.
There are, of course, different ways to access your
home equity, but if you're 62 or older, you may want to consider a reverse
mortgage. Not only can you use it to access tax-free cash, but you don't have
to repay your loan until you leave the home.
This way, you'll have the financial freedom and
flexibility to design the retirement you want, whether that's paying off bills,
fixing up the house, traveling or investing more, or helping out your children.
Use this helpful guide to bring greater clarity and
certainty to your future, with the open invitation to call American Advisors
Group anytime about whether a reverse mortgage-or another of their home equity
solutions-can help you achieve a better retirement.
What Is a Reverse Mortgage Loan?
Unlike a traditional home equity loan, such as an FHA
or refinance loan that you begin paying back soon after your loan closes, a
reverse mortgage doesn't have to be repaid until you leave your home*. In
addition to having no monthly mortgage payments, you will receive tax-free
proceeds from your reverse mortgage, and you can designate how you want to
receive them. Reverse mortgages were specifically designed to help those 62 and
older supplement their retirement.
The most widely available reverse mortgage loan is a
Home Equity Conversion Mortgage (HECM), insured by the Federal Housing
Administration (FHA). For higher-value homes that exceed the limit set by the
FHA, borrowers may be better suited with a non-HECM loan, also known as a jumbo
or proprietary reverse mortgage.
NOTE:
*You must continue to maintain your
property, pay property taxes and homeowners insurance, and otherwise comply with
all loan terms.
More than 1 million homeowners 62 and over have used a
HECM reverse mortgage to age in place.
(U.S. Dept. of Housing and Urban
Development, HECM Endorsement Summary Report, 2017)
How Do You Qualify For A Reverse Mortgage ?
To be eligible for a reverse mortgage, you must:
1.
Be
62 years or older (a non-borrowing spouse may be under age 62),
2.
Own
and live in your home as your primary residence,
2.
Undergo
a financial assessment to ensure a reverse mortgage can serve you as a sustainable,
long-term retirement solution,
4.
Receive
counseling by an independent, HUD-approved third-party to confirm you
understand your obligations and responsibilities with a reverse mortgage,
5.
Maintain
the property and continue paying property taxes, homeowners insurance,
homeowner association and any other applicable fees.
Does Your Property Qualify?
For HECMs
1.
Single-family
homes or 2-4 unit homes (You must occupy one of the units)
2.
HUD-approved
condominiums*
3.
Manufactured
homes that meet FHA requirements
How Much Money Could You Qualify For?
The size of your loan amount is based on three primary
factors.
1. Your Age:
The age of the youngest borrower or eligible
non-borrowing spouse-the older you are, the more funds may be available.
2. Your Home's Value:
The higher your home appraises at, and the more equity
you have in your home, may make more funds available .
3. Current Interest Rate:
Fixed and adjustable rate options are available the
lower the interest rate, the more funds may be available.
How Can You Access Your Funds?
Choose the payout plan that works best for you:
Term:
Receive monthly payouts for a fixed term,
Receive monthly payouts for life,
Lump sum payout:
Maximize your cash payout,
Growing line of credit:
Use as needed, interest charged only on the portion
you access.
*Available with Tenure-Based or Modified
Tenure plans, so long as Borrower does not default on the loan Borrower must
maintain home as principal residence, pay all taxes, insurance, maintain the
home, and comply with all other loan terms. With Modified Tenure plans, lender
will set aside a specific amount of money for a line of credit.
Modified plan:
Combine options for even greater control; an reverse mortgage professional can show you how.
"The entire process was very smooth
and concise. It was just the boost in cash flow we needed to live a good life
without dipping into our stocks and bonds. This was the perfect solution for us".
Your Reverse Mortgage Responsibilities :
Although a reverse mortgage can eliminate monthly
mortgage payments (principal and interest), you must continue to maintain your
property, pay all property taxes, homeowners insurance and comply with your
loan terms, as you would with any mortgage. To ensure that you can meet these
ongoing financial responsibilities you can establish a set-aside account that
can be financed into your reverse mortgage to limit your initial, out-of-pocket
expenses.
If you don't comply with your loan terms, however,
your home could go into default, which could lead to foreclosure.
It's also important to note that while you can sell
your home and pay off your loan balance any time without a prepayment penalty,
reverse mortgages make more sense financially the longer you plan to stay in
your home, as you're spreading your initial loan costs out over a longer
period.
Receiving funds from a reverse mortgage will not
affect your Social Security or Medicare. A reverse mortgage, however, could
impact Medicaid or Supplemental Security Income (SSI), so please speak with
your accountant or tax advisor for more information.
Advantages & Strategies of Reverse Mortgage:
Reverse Mortgage Advantages:
With a reverse mortgage, you not only remain the owner
of the home, but you can live in your home for as long as you want, with no
monthly mortgage payments*
a.
The
home equity you access is tax free (Consult your tax advisor),
b.
Use
your proceeds almost any way you wish (See Strategies),
c.
HECMS
are federally insured, meaning if your lender defaults, you still receive your
payments,
d.
Because
reverse mortgages are non-recourse loans, neither you nor your heirs will ever
owe more than your home is worth.
Reverse Mortgage Strategies:
The ways people are responsibly using their reverse
mortgages for a better retirement are virtually unlimited.
1)
Pay
off my existing mortgage to increase cash flow.
Paying off your current mortgage is a reverse mortgage
requirement. By removing your monthly mortgage payments, your cash flow
increases*.
2)
Renovate
my home to make it safer and more enjoyable.
The right home improvements can also help maintain or
even increase the value of your home.
3)
Give
my retirement savings accounts more time to grow.
By tapping home equity and leaving your investment
accounts intact, your assets can continue to grow through the magic of
compounding interest.
4)
Delay
taking my Social Security for larger payouts later.
Social Security benefits increase by a certain
percentage each year if you delay your retirement beyond full retirement age.
That's an effective savings plan.
5)
Build
a stronger safety net.
The best defense against unexpected expenses, such as
medical emergencies, sudden market downturns and other life events, is to
ensure you have financial resources standing by to deal with them.
6)
Gain
greater peace of mind for my long-term healthcare needs.
By creating a reverse mortgage line of credit, which
grows over time, you can have money for your care when you need it.
7)
Purchase
another home that will better fit my needs.
Instead of using all cash, put down only a portion of
the purchase price (from your previous home's sale or from other savings and
assets) and use a HECM to cover the rest, leaving you with no future monthly
mortgage payments".
*You must continue to maintain your
property, pay property taxes and homeowners insurance, and otherwise comply
with all loan terms.
8)
Protect
my portfolio in a down market.
Instead of being forced to sell an investment in a
down market, you could wait for the market to rebound by using proceeds
provided by a reverse mortgage to make up any shortfall.
9)
Create
a lifetime income stream for my family and me.
A reverse mortgage gives you multiple payment options,
including monthly disbursements for life as long as you live in your home**.
10) Pay off other debt, like high-interest
credit cards.
Using a reverse
mortgage to pay off credit cards or other high-interest debt may prove a sound
financial strategy. What a reverse mortgage shouldn't be used for, is an excuse
to overspend or avoid addressing what caused the debt in the first place.
**Available with Tenure-Based or Modified
Tenure plans, so long as Borrower does not default on the loan. Borrower must
maintain home as principal residence, pay all taxes, insurance, maintain the
home, and comply with all other loan terms. With Modified Tenure plans, lender
will set aside a specific amount of money for a line of credit
Stronger Safeguards and Protections :
Reverse mortgage loans come with many safeguards for
your financial protection.
Limited Fees
HECM origination fees are regulated by the U.S.
Department of Housing and Urban Development (HUD). HECM loan costs may vary
among creditors and loan types.
First-Year Withdrawal Cap
HUD established limits on the amount of money you can
access your first year to help you better balance your short and longer-term
financial needs.
Credit Line Growth
The unused portion of your credit line continues to
grow-giving you an incentive to responsibly access only the credit you need.
Financial Assessment
Before you can formally apply for a reverse mortgage,
you will undergo a financial assessment to determine whether a reverse mortgage
or another financial option can best serve you.
Counseling
You will receive counseling by an independent,
HUD-approved third-party to help you explore and address whether a reverse mortgage
or another alternative may offer you the best financiasolution for your needs
and goals.
No Pre-Payment Penalty
You can choose to repay your reverse mortgage anytime
without penalty.
Non-Recourse Loan
When repayment is due, neither you nor your heirs will
ever owe more than your home is worth.
FHA Mortgage Insurance: What You Need to Know
2. Should the lender default, you will continue to be
paid, regardless.
3. Should the balance of the loan be larger than the
value of the home when payment is due, the insurance fund covers the
difference.
The Truth About Some Popular Reverse Mortgage Myths :
Although simple in concept-converting a portion of
your home equity into cash while you continue to enjoy the comforts of living
in your own home* certain myths and misinformation have sprung up around
reverse mortgage loans. Here we address a handful of these common mistruths:
*You must continue to maintain your
property, pay property taxes and homeowners insurance, and otherwise comply
with all loan terms* .
The bank owns my home :
No. When taking out a reverse mortgage loan,
you retain title to the property. The lender puts a lien onto the title to
ensure repayment of the loan. This is the same for a reverse or a traditional
mortgage.
I cannot get a reverse mortgage loan if I have an
existing mortgage.
No. You just need sufficient home equity for
the loan to make sense.
I won't qualify because I don't have enough income.
No. You don't have to earn a certain amount
of money. Rather, you need to show you have the financial ability to pay your
ongoing property taxes, home insurance and other property-related expenses.
The lender receives whatever money remains after the
home is sold to pay off the reverse mortgage.
No. Any leftover funds go to the heirs or
the estate.
I will lose my house if I exhaust my loan funds.
No. You cannot lose your home as long as you
continue to comply with your loan terms, such as maintaining your home and
paying your property taxes and homeowners insurance.
I will be restricted on how I can use my reverse
mortgage proceeds.
No. You can use the proceeds for almost any
purpose.
I will be taxed on my loan amount.
No. Because a reverse mortgage is a loan,
your proceeds are not taxed. Consult your tax advisor for more information,
however, as tax laws can change.