Have you or a loved one considered a reverse mortgage? 

Are you intrigued by what you hear but afraid that it sounds just too good to be true.?

You’re not alone, more and more people are asking me about reverse mortgages and getting the right reverse mortgage set up can give a much needed lifeline to seniors that are struggling to make ends meet every month. 

How does it work? 

A reverse mortgage is a loan that eliminates your monthly mortgage payment and uses the equity built up in it to give the homeowner a monthly income, a line of credit, or cash at closing to pay off bills, or any combination of the above. 

Here are some basic features of a reverse mortgage (courtesy of reversemortgage.org)

1. You must be at least 62 years old and own a home. (Note: There are some conventional reverse mortgages that have differing age requirements.)
2. You ALWAYS retain title (ownership) to the home. The lender never, at any point, owns the home, even after you (or last surviving spouse) permanently vacate the property.
3. You must still pay property taxes and insurance, and keep the home well maintained. If you are unable to pay your property taxes and insurance, then a special set-aside from your reverse mortgage can be created.
4. Repayment of the loan occurs when you (or last surviving spouse) permanently vacate the home. You or your heirs (estate) then must facilitate the pay back of the loan using either private funds or selling the home. After the loan is repaid, all leftover proceeds from the sale of the home go to you or the estate.
5. The amount of funds you are eligible to receive depends on your age (or age of the youngest borrower in the case of couples), the value of the home, the interest rate and the upfront costs. With the HECM product, the county lending limit is a factor. With all products, the older you are, the more proceeds you are eligible to receive.
6. Loan fees can be financed, or paid out of the available loan proceeds. This means you incur very little out-of-pocket expense to get a reverse mortgage. In most cases, you only have to pay for the appraisal, which costs roughly $350 depending on your market.
7. The loan balance (amount owed) grows each time you access funds from your line of credit or receive a monthly payment. In addition, the lender is charging you interest on the outstanding loan balance as well as a monthly servicing fee.
   Repayment of the loan is not required until you (or the last surviving spouse) permanently leave the home as a primary residence. For the HECM program, you can live up to 12 consecutive months outside the home, but this may vary for other products.
8. All reverse mortgages have a “non-recourse” feature, which means that the total amount owed can never exceed the appraised value of the home. If the amount owed exceeds the home’s appraised value, then the lender or the federal government (in the case of the HECM product) will absorb that loss.

This year, the industry is on pace to help even more seniors live a more comfortable lifestyle.  According to the NCOA (www.ncoa.org) there are more people taking out a reverse mortgage than ever before.

The Reverse Mortgage Forecast

* Source: HUD Data as provided by MBA of America

According to the U.S. Census, the population of seniors age 65 years and above is projected to increase 147 percent between 2000 and 2050. Currently seniors own over $2 trillion in home equity (NRMLA) and less than 1 percent has been tapped by the reverse mortgage program.

If you are interested in learning more about whether or not a reverse mortgage is a good option for you, call me today.