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Learn More About Reverse Mortgages
What is a Reverse Mortgage?
A reverse mortgage allows borrowers age 55 or older to access part of the equity in their primary home without making payments. Accrued interest is simply applied toward the loan balance. If there is a current traditional loan balance on the home, the entire balance may be included in the reverse mortgage.
How do Reverse Mortgages differ from traditional Forward Mortgages?
Typical home equity loans, second mortgages, and home equity lines of credit (HELOC) have strict requirements for income and creditworthiness. The homeowners must make monthly payments to repay the loans, and are responsible for property taxes, insurance, and maintenance.
Typical Reverse Mortgages have no credit score requirements. Homeowners receive cash from lenders without being required to make monthly payments, and accrued loan interest is added to the balances of the loans. Homeowners are required to use their homes as their primary residences, and are responsible for property taxes, insurance, and maintenance.
How is money from a Reverse Mortgage distributed?
There are several ways to receive the proceeds from a reverse mortgage:
– Lump sum: A lump sum of cash at closing
– Tenure: Equal monthly payments as long as the homeowner lives in the home
– Term: Equal monthly payments for a fixed number of years
– Line of Credit: Draw any amount at any time until the line of credit is exhausted
– Any combination of the options listed above
Does the homeowner keep title to the property?
Borrowers maintain title and may remain in the home indefinitely, even if the loan balance becomes greater than the value of the home. The general loan conditions are: At least one homeowner lives in the home as their primary residence, continues to pay required property taxes and homeowners insurance, and maintains the home in accordance with FHA requirements.
Do heirs inherit an estate with a Reverse Mortgage loan?
Reverse mortgage loans are structured to preserve equity in the property. In the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner’s estate has 6 months to either refinance the property/repay the HECM loan, or sell the property.
What happens when the home is sold? If the equity in the home is higher than the balance of the HECM mortgage, the remaining equity belongs to the estate. If the home sells for less than the amount of the mortgage, the lender must take a loss. No other assets are affected by a HECM mortgage: (Investments, second homes, cars, and other valuable possessions cannot be taken from the estate to pay off the mortgage.)
What are the Reverse Mortgage loan limits?
Please use our free calculator to estimate the available amount. This generally depends on four factors:
– Age
– Current interest rate
– Appraised value of the home
– Government imposed lending limits.
Why choose a Reverse Mortgage?
Diversify sources of retirement income
Hedge against risks such as market downturns and outliving savings
Provide a source of funds for senior living expenses
A resource to allow seniors to remain in their homes after retirement
Provide a source of emergency funds
Pay for in-home care
A source of nontaxable income: (Because the money is a loan, it won’t increase your income tax rate or Medicare premiums)
As in any important financial decision, a borrower should be well-informed. We require borrowers to attend counseling with a third-party HUD certified specialist that will review all the pros and cons of a reverse mortgage, and help ensure it is a good fit for them.
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Save Money Around The House
Swap Out Old Light Bulbs for LED Lights
If you have old light bulbs, consider LED lights. They might seem like a more expensive investment up front, but you’ll save quite a bit in the long run. Save up to nine percent annually by replacing your frequently used light bulbs with more energy-efficient options.
Lower Energy Rates
Many electricity suppliers offer a discounted rate for energy use outside of peak hours, which typically run from late afternoon into the evening. Run a full load in your dishwasher or laundry before bed and save a considerable amount on your electricity bills.
Keep All the Vents and Filters Clean
Do your due diligence and clean the vents and filters in your home: replace the A/C filter every three months. The Department of Energy reports that this cuts down energy use by 15 percent.
Use Fans Instead of Air Conditioning
Hot summers may tempt us to run the A/C all day, pushing our electricity costs up. Instead, opt for good room fans to cool off, or check out home improvement retailers for a ceiling fan. And if you’re using the A/C, you can get more out of it using your ceiling fan.
Keep Seals and Ducts Tight
This is a big one: check if the seals on doors and windows are tight, and that your heating and conditioning system ducts are properly sealed. Doors and windows often leak heat during winters and cool air during the summer.
Make Small Adjustments Around the House
Implementing little changes in your home can make a big difference. Refrigerators tend to use a lot of energy, so turn the fridge and freezer temperature up a notch for easy utility savings.
Another quick tip that curbs utility costs is adjusting your thermostat by a few degrees. According to the Department of Energy, you can save around 10 percent on heating and cooling costs by turning the thermostat down seven to ten degrees for eight hours a day.
Save Water in the Bathroom
There are simple fixes for bathroom fixtures that contribute to your water bills. While taking shorter showers can help, you can enjoy longer showers and cut down your water usage by installing water-saving shower heads and faucets.
Also check for leaky faucets, shower heads, and plumbing; a shower that leaks 10 drips every minute can equal 500 gallons per year.
Lighten the Load on Your Water Heater
Water heating makes up about 18% of household energy use, and the average household spends $400 to $600 every year on water heating. Lowering a water heater by 20 degrees can save you 10 to 15 percent on your bills.
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