22 Fast Facts about Reverse Mortgages
Many seniors share similar ideals; work hard, provide for the family, retire with the resources to meet basic needs and leave a legacy to their family, often in the form of home equity. While a few have seen this American dream fulfilled, for many seniors, their efforts have been derailed by unexpected life events and the rising cost of living. These concerns have many seniors worrying with what if’s: What if I can no longer make my mortgage payment? The car breaks down? My health takes a turn?
For many seniors, the solution to “what if” can be found in a reverse mortgage. They have discovered reverse mortgages are a safe, secure financial tool that can assist them to remain in their home, free of mortgage payments, financially independent, and with the peace of mind knowing they have the resources to pay for health care, home modifications, or simply enjoy life a little more.
Making the decision to obtain a reverse mortgage is often wearisome. It is not uncommon for seniors to find it difficult to set aside their belief that the equity in their home is somehow off limits, or to overcome feelings of fear or guilt about pursuing a reverse mortgage, even when it may be the best solution to meet their financial needs.
What is a reverse mortgage? It is a financial arrangement that enables the home owner to withdraw a portion of the home’s equity, yet remain in the home as long as desired. There are no limits or restrictions on how the proceeds may be used and no form of monthly repayment. When the homeowner sells, or has passed, the loan is repaid. Plus the program is insured by the Federal government. The title and ownership is not forfeited nor are any other rights of the homeowner. You or your heirs decide when, or if, the home is to be sold and after repaying the loan balance, all remaining equity in the home belongs to you or your heirs.
Who qualifies? Qualifying for a reverse mortgage simply requires that the homeowner(s) be 62 years of age or older, that the home is the primary residence, and the home must meet standard FHA appraisal guidelines for property type, value and condition. Since the borrower does not make a monthly payment, factors such as credit rating, income and assets are not considered.
Is it safe? In 1988 HUD adopted reverse mortgages and, with the assistance of congress, enacted laws that put into place 12 safeguards that guarantee a senior will not give up title to their home and will not put themselves, their home or their family in any financial risk. Paying off a traditional mortgage with a reverse mortgage secures the home and eliminates any possible risk of foreclosure due to an inability to make a monthly mortgage payment.
How much of the equity may be used and how are the funds received? HUD provides authorized lenders with a tool called a Reverse Mortgage Calculator which determines the amount of equity available to a homeowner. The determining factors are the borrower’s age, home value and current interest rate. From this calculation, fees are deducted and any existing mortgage balances are paid in full. The amount that remains is available to the homeowner to draw down in lump sum, treat as a line of credit, receive monthly tax-free income, or any combination of these three options. Regardless of how funds are drawn, there are no monthly payments to be made. Interest accrues only against the funds drawn out. Thus all remaining equity belongs to you or your heirs.
How can the funds be used? Some seniors obtain a reverse mortgage only as a safety net to be used in emergencies. Others use the funds sparingly for things like home repairs, property taxes, or unexpected expenses. For others, it is the additional tax-free income that makes the difference between just getting by and living comfortably and financially independent in their own home.
How do I select a lender? It is not interest rates and fees that distinguish reverse mortgage lenders, it is depth of knowledge. While a growing number of traditional lenders offer reverse mortgages, you will want to select a local lender that is dedicated to being an expert in reverse mortgage lending.
AmeriSTATE BANK meets these requirements and are a proud participant in the 1st Reverse Mortgage USA Lender Network® We’re there for you—for us It’s All About Peace of Mind. Contact Jarod Dutton at 903-813-4700 ext 430 today for more information.