post by Sam Collins
If you said the words “reverse mortgage” a few years ago, and you may have gotten look that said, “Oh, I’m sorry, but you had to take one of those.” It was the product of last resort, the product of the destitute. Today, however, when you say those same words, you will often find yourself drawn into a conversation where those around you are anxious to hear about your experience.
Yes, indeed, reverse mortgages have arrived. They are enjoying much popularity, and not only among those who “need” the money. More and more, seniors are using reverse mortgages to finance the “wants’ in their retirement years. Indeed, as education about the real benefits of the reverse mortgage has spread, the informed senior as well as their advisors, have embraced this innovative product.
What is a reverse mortgage?
A reverse mortgage, is a loan product that gives homeowners age 62 and over the ability to tap a portion of the equity in their primary residence without having to sell their home or take on a new mortgage payment. Although the reverse mortgage has existed for many years (the first one done back in the 1961 in Portland, Maine), the structure and safeguards of the product today have made it an attractive way for many seniors to finance those golden years.
Bottom line a reverse mortgage can allow borrowers who qualify to use their equity and they get to live in the home without a monthly payment. The borrower controls how the funds are taken- either in a lump sum, monthly allowance, line of credit, or any combination other choices. So for example, if a senior wants to eliminate some debt, receive a monthly check, and have some funds in reserve for future needs, a reverse mortgage can satisfy all of these. If there is a mortgage or home equity loan/line on the property, it must be paid off when the reverse mortgage is taken. For many, if this mortgage payment “go away” is enough to make a big difference in their monthly budget. If a senior is currently making a home equity loan payment of $500.00 each month, that $500.00 increases cash flow and can now be put toward other monthly obligations or expenses such as prescription medications.
The amount of reverse mortgage funds available to a senior homeowner are based on several factors. First, the age of the youngest applicant is used. The minimum age is 62. In addition, the home value, as determined by an appraisal is taken into account. Also, the current interest rates (depending on which product is selected) is the used in the calculation, along with the current FHA ledning limits. These pieces of the puzzle will determine the amount of reverse mortgage proceeds the senior homeowner can take. If there is an existing mortgage or any type of lien, it must be paid in full at the time the reverse is taken. Other than that, the use of the funds is determined by you the homeowner. And the funds are *generally tax-free which makes the reverse mortgage a great option for many of today’s informed seniors.
How do most seniors use reverse mortgage funds for? The answer to that question is as varied as the borrowers themselves. Some common uses include medical bills, prescription medication expenses and co-pays, real estate taxes, upkeep on the property, and supplementing current monthly income. There are nearly 90% of seniors in our country relying on Social Security to meet some part for monthly expenses, proceeds from a reverse mortgage can meet a real need. Many seniors are using the reverse mortgage to actually enhance their quality of life during their retirement years.
More and more seniors are taking reverse mortgage proceeds and using these funds for travel, purchasing a motor home, gifts to children, funding grandchildrens’ college education, and charitable giving. Some are even putting this equity to use in the purchase of a vacation property or second home. Many are now using them to purchase homes. Home improvement or modifying your home is another use for reverse mortgage funds that has increases over time.
Certainly with the current economic climate reverse mortgages will continue to be of tremendous value to our seniors.
To recevie a free brochure or DVD just CLICK HERE
Sam Collins
Reverse Mortgage Senior Advisor
Delaware Financial Capital Corp.
Committed to Improving the Lives of Seniors
Licensed Mortgage banker in DE
scollins@delawarefinancial.com
Tags: Hecm, homeowners, Reverse Mortgages, Seniors