When our clients first call us inquiring about the Reverse Mortgage program, some of the most common questions we receive are about what the Reverse Mortgage is and what are some of the benefits of the program. Our goal is to best inform our clients about what the loan program is all about and to let them know the benefits. Below is a description of the Reverse Mortgage program and some of the many benefits of the program.
What is a Reverse Mortgage
A Reverse Mortgage is a financial tool that allows people over 62 who own their home to access the equity they have built up in their home. It eliminates any current mortgage by repaying the mortgage back with the proceeds of the reverse mortgage and gives the senior cash to use any way they want. There are currently no income or credit requirements. The only requirements are that they use the home as their primary residence, they are at least 62 years old, and they have sufficient equity in their home. The Reverse Mortgage program is available in two options, the Standard and the Saver. The Home Equity Conversion Mortgage (HECM) is the Federal Housing Administration’s (FHA), Reverse Mortgage. The Standard is designed for people who want the most money available. This allows you to borrow the maximum amount of cash. The HECM Standard loans two percent of the upfront mortgage insurance premium, paid based on the appraised value of the property. The ongoing premiums are 1.25 percent of the outstanding balance.
The other option is the HECM Saver. The purpose of this program is to lower the upfront loan closing costs for homeowners who want to borrow a smaller amount than what would be available with a HECM Standard loan.
With the HECM Saver you will have an upfront premium of only .01 percent of the property’s value, compared to the HECM Standard option which requires an upfront premium of 2 percent. Both the HECM Standard and HECM Saver have a monthly charge for the Mortgage Insurance Premium (MIP) at an annual rate of 1.25 percent of the outstanding loan balance.
The Standard and Saver are two of the Reverse Mortgage products that have many benefits to the client. While it will depend on your situation for which program will work best for you, the benefits of the programs are the same.
Benefits of a Reverse Mortgage
There are many benefits with a Reverse Mortgage and it can really be a great tool to help with retirement planning for people in certain situations. Here are some of the benefits of the Reverse Mortgage loan.
- You are not required to make any payments on your Reverse Mortgage until the home is sold (by owner or borrower of the estate).
- There are currently no credit, income or health requirements to qualify for a Reverse Mortgage.
- Proceeds received from a Reverse Mortgage are tax-free.
- You remain on the title of your home. Much like a traditional mortgage, you will still be responsible for maintaining the home and paying taxes and insurances.
- The HECM Reverse Mortgage is a non-recourse loan, which means HUD guarantees that you will never owe more than what the home is worth.
- You may use the proceeds for anything you wish.
Our goal here at One Reverse Mortgage is to provide as much education about the program to our clients. The goal is to make sure clients completely understand the program and are making a sound decision in regards to getting a Reverse Mortgage. Another step that is taken to provide information to clients is the counseling sessions, required by the FHA. The counseling session is done by a third party to make certain that the information you are getting is unbiased.
While some reports are suggesting that reverse mortgage programs are confusing older consumers, here at One Reverse Mortgage we are providing education and answers to clients who are looking for the truth about this loan that has helped countless seniors stay in their home.
If you are thinking about a reverse mortgage, give us a call today at (800) 442-6862. One of your licensed professionals will answer any questions you may have about the reverse mortgage process.
Kristen Curzytek is a writer for Retiring Wise. Give us a call at (800)401-8114 to talk to one of our licensed professionals. They can discuss your financial situation with you and determine if a reverse mortgage makes sense for you and your financial goals.