Have you heard any of these statements from a homeowner 62 and older? They may find their solution is a reverse mortgage and they should be encouraged to get the facts to see if the FHA insured Home Equity Mortgage (HECM) is right for their situation.
- “I want to stay in my home.”
- “My only option is to move.”
- “I’m planning for retirement.”
- “I’m not sure how I’m going to afford any potential long-term care costs.”
- “I can’t afford home health care.”
- “We can’t afford a mortgage payment.”
- “We can’t afford to make home repairs or modifications.”
- “I need money but drawing from my retirement plans have penalties.”
- “Not enough money at the end of the Social Security check.”
- “I need help with keeping up my home with housekeeping or yard work.”
- “I’m downsizing and moving.” or “I’m moving closer to my children.”
- They can’t afford the little extras that would help them maintain and enjoy their life.
- They want Security, Independence, Dignity, and Control which they are missing in some way now.
There statements fit into the 5 general reasons to do a reverse mortgage:
- Needs based: need funds immediately for covering living expenses
- Maintaining lifestyle: having funds for travel, buying a car, purchasing vacation home
- Protecting or delaying draws from other investments: Using the reverse mortgage to tap home equity rather than accessing other investments or retirement funds that may have penalties or are taxable; let the investments or retirement funds grow so more retirement funds are available later in one’s life; use the home equity so other investments can be left as the inheritance
- Planning for long-term care needs (Standby reverse mortgage): Taking the reverse mortgage at a younger age then leaving in the line of credit which grows to have funds to draw from in the future when “life happens”
- Purchasing a new home: Whether downsizing, moving closer to family or buying a dream home, the reverse mortgage can be used for financing.
A reverse mortgage is a mortgage with special terms for seniors 62 and older. Some of the differences from a traditional mortgage include income and credit scores are not considered to qualify for the interest rate and monthly mortgage payments are not required. Borrowers are responsible for paying property taxes, insurance, maintaining the home and abiding by the terms of the loan. Borrowers must meet HUD’s financial assessment qualifications to demonstrate ability and willingness to pay property taxes and insurance into the future.
Rather than a 15 or 30 year term, the loan is due and payable when the home is no longer the primary residence of the borrowers or on the 150th birthday of the youngest borrower. In addition, the reverse mortgage is non-recourse, which means if the loan balance is higher than what the home can be sold for there is no personal liability to the borrower or their heirs. If the home is sold for more than the loan balance, the borrower or their heirs receive the difference. The most common and only reverse mortgage available in Minnesota is the FHA HUD insured Home Equity Conversion Mortgage or HECM.
Options are available! When you hear any of the above statements remember a reverse mortgage may be the option that is the most beneficial to their situation.
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