Reverse Mortgage Facts – You Have Options
By Paulette Wisch, Universal Lending ~
Many homeowners realize their greatest financial asset is the equity or money they have accumulated in their homes. If we want to use this money, we consider either selling the home or borrowing against it. The problem with selling is, we still need a place to live, if we borrow money against our home there will certainly be payments. Another option for consideration might be a reverse mortgage.
Simply stated, a reverse mortgage converts a part of the equity in your home into spendable money. A calculation is done based on age; one person must be at least 62+, value of the home and an interest rate, to determine how much would be available in proceeds.
The most popular reverse mortgage is the FHA program called the Home Equity Conversion Mortgage or HECM. Typically, the homeowner(s) will first meet with a local lender for information. Then as a consumer protection, FHA requires all interested parties to participate in an information session or “counseling” with an FHA approved housing agency. This meeting is conducted to make sure all parties through both meetings understand the program.
Are Reverse Mortgages Safe?
- FHA requires consumer “counseling” to make sure the program is understood
- You remain the owner of the property
- You can sell and move at any time
- You are guaranteed no debt left to heirs or estate
- Proceeds from a reverse mortgage are not considered taxable income
- You decide how to take your loan proceeds – you are in control
- There are no monthly payments required
In addition, there are no restrictions on how you use your money, a few ideas are; take a monthly stipend; do home improvements needed; pay off debt; be prepared to hire in home help if required; help a grandchild pay for college; upgrade your car; treat yourself to that trip you have always wanted to take; have extra money for the big expenses that come up. The reverse mortgage does not affect Social Security or Medicare benefits and most people on Medicaid also qualify. For most people, the reverse mortgage creates financial security because of additional cash flow. One lady told me years ago, her Dr. had taken her off blood pressure medication because the stress over money was gone.
The house does not have to be free and clear to get a reverse mortgage, however, the lender will need enough in loan proceeds to pay off any existing home loans. There are no out of pocket fees to complete the loan as they can be financed. Owners of the property will be responsible for real estate taxes, homeowner’s insurance and any HOA dues and must live in the home as a primary residence. The loan is not due until the last remaining borrower permanently leaves the property.