Is a Reverse Mortgage Right for You?

By Guest Contributor January 8, 2016 17:37

By Stan Forrest

A reverse mortgage (HECM-Home Equity Conversion Mortgage) is a federally insured loan that allows homeowners 62 and older to convert a portion of the equity in their home to cash, while they continue to live in and own their home.

You can never owe more than your home is worth. Unlike a traditional mortgage or home equity, no monthly mortgage payment is required. The borrower must occupy the property as their primary residence. The loan balance, which includes accrued fees and interest, becomes due when the last surviving borrower no longer lives in the home as their principal residence or when they choose to sell their home.

The key eligibility requirements for a reverse mortgage:   reverse mortgage

• You must be 62 years of age or older.

• You must own your home and occupy it as your primary residence.

• You must stay current on your home maintenance and paying property taxes, required insurance and any homeowners’ fees.

• You must not be delinquent on any federal debt.

• You may be eligible even if there is a first or second mortgage on your home.

• Your credit history, income and monthly expenses will be evaluated to determine whether you can meet HECM loan terms.

Two types of loans available 

There are two options available with reverse mortgages: fixed rate and adjustable rate loans.

Fixed rate loans are limited to a single lump-sum payment option where there is a single, full disbursement at loan closing and no further draws. The fixed rate provides the predictability of an interest rate that will never change. Adjustable-rate loans provide flexible payment options, and allow for future draws. The adjustable rate is an open-end credit loan that offers you the flexibility to pay down the balance and redraw funds.

You can use the funds for anything you want: eliminate your monthly mortgage payment; supplement your income; use the income to defer draws against social security or other sources of income; pay for prescription drugs and unexpected healthcare expenses; purchase a new home; meet short-term financial goals; maintain a quality lifestyle; prepare for a more rewarding retirement; upgrade appliances or do home renovations … things you may never have imagined you could do before.

Do your homework before signing 

My personal recommendation to anyone, be it a friend, neighbor, family member or client, is to learn as much as you can and do your homework. Read articles, consult trusted advisors, talk to someone who has a reverse mortgage, and ask questions to educate yourself and your family before considering any reverse mortgage.

When researching a reverse mortgage, speak and meet with a knowledgeable reverse mortgage specialist face to face to get the facts and figures you need to make an informed decision. Bring your spouse, a family member, financial advisor, real estate attorney or friend. Make sure you bring a list of questions to this meeting and get them answered to your satisfaction.

Whether a reverse mortgage (HECM) is the right loan for you can only be answered once you have all the information and understand the reverse mortgage products available to you. If you feel it is necessary to speak and meet with the specialist a second time by all means do so, because it is their responsibility to make sure you understand every aspect of the loan before you make this very important decision to proceed with a reverse mortgage.

You can also get more details and direction from an independent counselor approved by HUD (U.S. Department of Housing and Urban Development) who is not affiliated with the lender and is qualified to answer your questions, discuss options and address your concerns.


Stan Forrest BusCardPhotoAbout the Author

Stan Forrest of Sonora, California, is a reverse mortgage specialist with more than 14 years’ experience.  Contact him at (209) 694-0113, security1.com/Specialists/stan-forrest.

 

 

By Guest Contributor January 8, 2016 17:37
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