An Overview Of Reverse Mortgages
These days, seniors often face a large degree of financial uncertainty. The retirement they envisioned 5 and 10 years ago is, in many cases, not the same as the reality they face: investments are flat or declining, medical expenses and living expenses are higher than ever, and few income boosting options are available. Those seniors that have heard about Reverse Mortgages are likely not sure how they work, and don’t know what questions to ask to begin to learn about them. They will often turn to their financial institution for guidance and information. As a result, by becoming familiar with these products, you can become an even more important resource for your clients but helping them understand alternative income supplements.
A Reverse Mortgage is a loan that allows seniors to boost their income by converting a portion of the equity they have built in their home into cash. This cash is not taxable and typically it doesn’t interfere with eligibility for Social Security or Medicare benefits. The exception is the federal Supplemental Security Income Program, where beneficiaries must keep their liquid resources under certain limits.
The majority of reverse mortgages are Home Equity Conversion Mortgages (HECMs), and are therefore guaranteed by the FHA. In order to help homeowners with properties that exceed FHA lending limits, various proprietary products have been created.
There are a few qualifications for a reverse mortgage. Every title holder must own a home with some equity, and be 62 or older; there aren’t any income or credit filters. Current mortgages or liens must be paid off, but this is often accomplished with the proceeds from the reverse mortgage. The homeowner is required to remain current on insurance and property taxes, but these can also be paid with the reverse mortgage proceeds.
A reverse mortgage borrower has no restrictions on how the monies can be used. Here are common uses for these funds:
– Paying off debts, often credit cards and mortgages.
– Remodeling projects or other home improvements
– General living expenses
– Day to day expenses
– Vacations
– Assisting children with financial obligations
– Education
– To fund hobbies
The proceeds available from a Reverse Mortgage vary depending on FHA lending limit’s and other factors like borrower’s age, value of the home, and interest rates. Typically the older the borrow, the higher proceeds available. Proceeds from the loan can be paid in a lump sum, in monthly payments, or extended as a line of credit available when needed.
