Are you looking to boost your monthly retirement cashflow?
Do you have rising health care/housing/living expenses – they are all going up!
Does your home need to be renovated to accommodate a loved one?
How are you going to pay for in-home care – on your credit card?
Do you want to move closer to family, possibly downsize or upsize?
If you answered YES to any one of the above questions – take a look at a Reverse Mortgage. You may like what you see!
WHAT IS A REVERSE MORTGAGE?
(Technical name: Home Equity Conversion Mortgage (HECM)
A reverse mortgage is a Federal Housing Administration (FHA) insured loan which enables you to access a portion of your home’s equity without having to make monthly mortgage payments. Just like a regular mortgage, you are still responsible for the payment of your property taxes and home owner’s insurance; however, with a reverse mortgage – borrowers are not required to make payments of principal and interest. You can even purchase a NEW home with a reverse mortgage.
WHO IS ELIGIBLE FOR A REVERSE MORTGAGE?
Key requirements include:
- One of the borrowers must be at least 62 years of age.
- You must live in your home as your primary residence and have sufficient equity.
- Cannot be delinquent on Federal debt.
- Property must be a single-family residence, an owner occupied 2–4-unit home, condominium approved by the Department of Housing and Urban Development (HUD), or a manufactured home on land you own (not rented).
- Meet financial assessment requirements established by HUD.
A FEW BENEFITS OF A REVERSE MORTGAGE:
- Refinance existing mortgage debt and eliminate monthly mortgage payments.
- Access to the equity in your home for increased cash flow.
- Age in place and retain the title to your home.
- Proceeds are not taxed as income and can be used for anything you choose.
- Heirs inherit any remaining equity in your home after paying off the balance of the loan.
- FHA insured loan.
- A Reverse Mortgage for Purchase allows the borrower to put less money down on a new home – giving you the freedom to use that cash any way you like. Think of the possibilities!!!
Old vs New – The New Reverse Mortgage loans have built-in safeguards that protect you and your home.
When you hear the words “reverse mortgage” some people think “they are bad – families lost their homes during the recession!” That is true – however – the industry and federal government saw the flaws in these loans and build in safeguards to protect the consumer!
Here is what they put in place…..
Mandatory Mortgage Insurance – (FHA) Insured
This mortgage insurance protects the borrower and their heirs in the event the loan balance is higher than the home’s value when the loan becomes due and payable. Your heirs will not be responsible for paying the difference between the loan amount and the home’s value. Which means – if home values drop – you do not have to pay a penny over the home’s value (even if your loan is more)! Making this a non-recourse loan.
There is an up-front mortgage insurance premium (MIP) fee at closing (2%) and, over the life of the loan, an annual MIP fee (.5%) on the loan balance.
Third-Party Independent Counseling
Once you have decided to move forward with a reverse mortgage and prior to completion of your application – borrowers must complete an independent HUD approved counseling session. The counselor will go over every aspect of the Reverse Mortgage Loan Comparison sheet provided to you by Compass Mortgage. They will help you understand the process, fees, obligations, and benefits/consequences of each reverse mortgage option.
We advise our clients to invite whomever they feel needs to be informed of this decision to the counseling session. The goal is for the borrower(s) to make an informed decision.
Capped Interest Rates
If your loan has an adjustable interest rate, there is a limit on how much the interest rate can change each time it adjusts, as well as, over the life of the loan.
No Prepayment Penalty
The reverse mortgage loan can be repaid at any time – in part or in full – without penalty. Borrowers who have opted for the Home Equity Line of Credit have purchased motor homes, toured for a bit, sold the motor home, and put the money back into the credit line!
Eligible Non-Borrowing Spouse Protection
A non-borrowing spouse (under age 62) can be designated at origination, to have repayment of the reverse mortgage deferred. They must continue to: occupy the home, pay property taxes and home owner’s insurance, as well as, maintain the property.
Two Types of Reverse Mortgage Loans
1 – Reverse Mortgage Loan on existing home with equity
Borrowers can choose from a fixed-rate or adjustable-rate loan. The fixed-rate maintains the same interest rate over the life of the loan. The adjustable rate is based on the Secured Overnight Financing Rate (SOFR).
2 – Reverse Mortgage Loan for New Home Purchase
The Reverse Mortgage for Purchase requires a down payment. When you take out a conventional reverse mortgage, the loan proceeds are based on the equity in your home; with this product, you must put the equity in your home by means of a down payment.
The down payment is approximately between 45% and 62% of the purchase price, depending on buyer’s age. Your portion of the down payment can come from savings, the sale of your other house, or a gift from a family member – it cannot be borrowed.
With a fixed-rate Reverse Mortgage loan, you can receive the cash in a lump sum.
With an adjustable-rate Reverse Mortgage loan, you can select:
- Equal monthly payments.
- Equal monthly payments for a fixed period of months selected
- by the borrower.
- Line of Credit
- Draw at any time and in any amount of your choosing until the line of credit is exhausted.
- Modified Tenure
- Combination of line of credit plus scheduled monthly payments.
Reverse Mortgage Process
The process to obtain a Reverse Mortgage is simple; but it’s helpful to know what you can expect. Below is the Reverse Mortgage Process:
- Meet with our Reverse Mortgage Specialist – Laura Gaida – by phone, Zoom, or in person to discuss your financial needs and goals.
- If you decide to move forward – we begin the loan application.
- Schedule an Independent, third-party counseling session with a HUD-approved counselor. They will explain and answer questions regarding the information provided on your Reverse Mortgage Loan Comparison Sheet. (shows all costs and options involved with the loan.)
- A property appraisal will be performed to determine the value of your home. This is a key factor in determining how much money you qualify for.
- Completing the final paperwork for the loan and choose a closing date.