The Paseo Financial Group
Recently, the Consumer Finance Protection Bureau put together a report to examine the reverse mortgage industry. This report concluded that the following groups of seniors were most likely to benefit from obtaining a reverse mortgage:
* Those looking to supplement a fixed income in retirement.
* Those who need a home equity line of credit (HELOC) but cannot qualify.
* Seniors who want to remain in home should they need long term care.
* Those who are looking to use a reverse mortgage as a financial tool as part of a retirement planning strategy.
This list is a good start, and we have a few additional uses for reverse mortgages that consumers may find useful. Here are additional ways that a senior could use the proceeds of a reverse mortgage:
* Pay off a forward mortgage and eliminate the monthly payment that goes with it.
* Use a credit line as a means of paying unexpected expenses, protect against loss of income from the death of a spouse, and/or to make sure that retirement income remains stable even if your other sources of funds fluctuate.
* For those with some savings—but perhaps not enough to feel comfortable throughout retirement—the line of credit option provides instant access to cash to optimize drawdown strategies when unexpected expenses arise, and during market downturns. If you get the line of credit now, the amount you can borrow grows as you age, effectively locking in immediate access to home equity when you need it most.
* Purchase a home using the HECM for Purchase program
When the borrower dies or moves out of the home, the reverse mortgage becomes due.
The senior must continue to use the home as his or her primary residence. Once the home is not used as a primary residence for 12 months, the reverse mortgage becomes due. When the borrower dies or moves out of the home, the reverse mortgage becomes due.
It is a “non-recourse” loan. This means the debt cannot exceed the market value of the property. Your heirs can keep the house and settle/refinance the loan or sell the house to settle the loan and keep the remaining money. If the house isn’t worth enough to cover the loan no debt will pass to them. The Federal Housing Administration covers it. Reverse mortgages are a great and safe way to get financial relief in your autumn years.
This concludes the five-part series of articles on Reverse Mortgages. Should you have any additional questions, please contact Melanie Sedam.
Melanie Sedam is a HUD-certified HECM mortgage originator and owns ReverseMortgage62AZ.com, which specializes in mortgage financing in the 55+ communities of Arizona. She can be reached at 520-829-5219 or [email protected]. There also is a 35-minute PowerPoint presentation on her website that goes into the financial details/numbers of a reverse mortgage loan.