Understanding a Reverse Mortgage

Everyone has a story. You might have scribbled, erased and rewritten the majority of your novel, but you still have room for the ending. Perhaps in the beginning chapters, you had the freedom to check your to do’s or cross items off your bucket list, but life happens and circumstances change as time passes. Maybe now you want to relieve financial stress that has built up over time or plan an early retirement. There are resources that provide opportunities to create the retirement you want. To continue your story, a reverse mortgage might be something to consider. Learn more about a reverse mortgage and speak with a financial advisor to see if this option is right for you.

Understanding a Reverse Mortgage

A reverse mortgage, also referred to as a Home Equity Conversion Mortgage (HECM), is a government ensured loan that takes the value of your home and transfers equity into funds for you to spend. With this loan, the property title will always remain in your name, unless you fail to pay property taxes, homeowners insurance and maintenance costs.

Reverse Mortgage Pros:

  • No more monthly mortgage payments. Though you are still responsible for paying property taxes, homeowners insurance, and home maintenance costs.
  • You remain the owner of your home. The title stays in your name.
  • You’ll never owe more than what the home is worth.
  • Allows the available funds in the line of credit to grow over time.

Reverse Mortgage Qualifications:

This is the criteria you will have to comply with in order to receive this kind of loan.

  • You must be 62 years or older.
  • The home must be your primary residence.
  • You must have enough equity in the home.
  • The home must meet Federal Housing Administrative (FHA) standards.

Types of HECMs:

Based on your circumstances, a licensed specialist can help determine which loan option is best for you. The loans can be tailored to your needs.

Adjustable Rate HECM

    • Receive your proceeds in various ways: line of credit, monthly payments, lump sum or any combination of the three.
    • The interest rate changes. It may increase or decrease throughout the life of the loan.
    • The longer the funds in the line of credit aren’t used, the more they will grow in value. This can give you more money in the future.

Fixed Rate HECM

    • This loan distributes your money in a lump sum only.
    • The interest rate is set when the loan is closed and stays consistent throughout the duration of the loan.

HECM for Purchase

    • This reverse mortgage product allows you to purchase a new home without having to make a monthly mortgage payment.
    • It provides you the opportunity to live closer to family, in a warmer climate, or in a place that fits your physical needs.

Reverse Mortgage Process:

  • The first step will be speaking with a licensed specialist about the product and if you qualify.
  • You’ll attend counseling with a Department of Housing and Urban Development (HUD) approved counselor for advice and to have any additional questions answered.
  • You will complete the application with your licensed specialist.
  • The next step will be to get an appraisal on the property.
  • All necessary documents will be reviewed and signed for closure of the loan.
  • Finally, you’ll close the loan and enjoy your funds.

Learn how to take control of your story. A reverse mortgage might give you the opportunity to say, “I did it my way.”