In this blog, we will be discussing and covering what a reverse mortgage and the benefits of knowing about reverse mortgages is. HUD is the parent of the Federal Housing Administration (FHA).
HUD’s FHA Reverse Mortgage is a great loan program for senior homeowners and home buyers. You must be at least 62 years old and have equity in your home to be eligible for reverse mortgages.
Benefits To Know About Reverse Mortgages For Homeowners With Equity
Over the past several years, home values skyrocketed to record historic highs. Many homeowners have equity in their homes. If you are at least 62 years old, have home equity, and need to get cash out of your home, a reverse mortgage may be a great option.
Homeowners with equity in their homes can qualify for FHA Reverse Mortgage with no income or credit requirements. Senior home buyers can also purchase their final home with a purchase reverse mortgage. A substantial down payment is required.
What Is a HECM?
A HECM – Home Equity Conversion Mortgage, or a Reverse Mortgage, is a loan where borrowers 62 years old or older convert the equity in their home. As with any financial product, numerous misconceptions and misleading information may cause understanding complications. This article will cover and discuss the benefits of knowing about reverse mortgages.
Frequently Asked Questions on Reverse Mortgages
Ten Top Benefits To Know About Reverse Mortgages – HECMs. Homeowners always retain ownership and title of their homes. The truth is homeowners remain the property owner during the life of the loan. Homeowners can sell the home at any time without a prepayment penalty. It is your home for you to do as you see fit.
Remember, the loan terms require borrowers to pay property, homeowner’s insurance, HOA if applicable, upkeep the property, and occupy the property as their primary residence. Regardless of age, homeowners never have to pay off the HECM – Reverse Mortgage Loan. A HECM does NOT need to be repaid until homeowners sell or no longer live in the home. If applicable, they comply with loan terms regarding paying the taxes, insurance, maintaining the property condition, and HOA fees.
Residual Income Benefits To Know About Reverse Mortgages
Regardless of age, if homeowners choose the monthly payments option, the monthly payments will continue for the rest of their life: Although the amortization schedule in the HECM package only calculates to age 99, they do not expect a life spanning past 99. Thus the age 99 limit, payments will not stop until homeowners no longer live in their homes.
The surviving spouse listed on loan gets the right of survivorship. The surviving spouse can stay until they move out or pass on.. The fact is, the main homeowner’s spouse does not have to be of age 62 yet. In this situation, the spouse goes on the loan as a non-borrowing spouse to have the right of survivorship.
Benefits To Know About Reverse Mortgages on Buying A Home
Home Buyers CAN buy a new home as their primary residence with a Reverse Mortgage – HECM for Purchase and have no monthly mortgage payments for as long as they live in the home. Using a Reverse Mortgage – HECM to purchase a new home is an excellent choice for a comfortable retirement.
This is because it will increase retirement financial survivability. The money used as the down payment is instant equity. It creates your needed equity position to close a Reverse Mortgage – HECM loan. Please see the specific post about Reverse Mortgage – HECM for purchase.
What If Homeowners Dies
Homeowners’ heirs will inherit the home if that is the homeowner’s plan. The fact is, any remaining equity in the home is the homeowner’s and heirs.
The Reverse Mortgage – HECM is a TRUE “non-recourse” loan: This means borrowers can never owe more than the value of the property when they or their heirs sell the home to repay the Reverse Mortgage.
Can Homeowners Make PITI Payments on Reverse Mortgages
Borrowers can make payments. However, they are not required to do so. Making payments is a choice. If homeowners choose to do so, it will increase their equity position considerably.
Homeowners do not need to own homes free and clear of any existing mortgages and liens.
Why Homeowners Use Reverse Mortgages
Many borrowers use the Reverse Mortgage – HECM to pay off an existing mortgage to eliminate the monthly payment. Removing existing mortgages/liens on homes with a reverse mortgage will create a comfortable retirement.
Any existing mortgages, home equity lines of credit, or property liens are paid off at closing.
Are Proceeds From Reverse Mortgages Tax-Free?
The Reverse Mortgage/HECM loan must be in the first and only position without any other loans/liens. Borrowers can receive tax-free cash at closing, if applicable. The fact is, you can use the HECM loan proceeds for whatever purpose you like; that includes purchasing a vacation home.
Can You Still Be Employed To Qualify For Reverse Mortgages
You can still be employed and qualify for a Reverse Mortgage – HECM. The fact is, the Reverse Mortgage – HECM loan requires borrowers to have residual income; the amount required depends on the state you are in and family size. The Reverse Mortgage – HECM loan does not have an income requirement, BUT it does have a residual income requirement:
What Is Residual Income Requirement on Reverse Mortgages
The residual income is the level of income that an individual has after the deduction of all personal debts and expenses has been paid. For example, a borrower in Florida with a family of two must-have $886 in residual income, the same borrower in California must have $998, and a Maine borrower must have $906.
Financial Benefits To Know About Reverse Mortgages
A Reverse Mortgage may help you plan for a comfortable, stress-less retirement living with greater financial independence. Analyze your retirement financial survivability rate and what adjustments you can make, if any, to increase your rate to get to 100% or higher. Considering using the HECM loan to help. Gustan Cho Associates’s team is experts in helping borrowers with reverse mortgages.
Summary Of The Top 10 Benefits To Know About Reverse Mortgages
Michelle McCue is the author of Top 10 Benefits To Know About Reverse Mortgages. Mike is also a contributing editor and associate writer for Gustan Cho Associates He is also a Staff Mortgage Expert on Mortgage Lenders For Bad Credit, Inc.
Michelle McCue is a licensed senior mortgage banker with Gustan Cho Associates. Michelle McCue is our company’s Reverse Mortgage Expert and has consulted countless borrowers and loan officers on Reverse Mortgages. Michelle is also an expert on government and conventional loans and has a national reputation for being able to close loans other lenders cannot. Over 75% of our borrowers at Gustan Cho Associates are folks who have either gotten a last-minute loan denial or are stressing over their loan process with another lender.
This article on the benefits to know about reverse mortgages was updated on December 7th, 2022
December 7, 2022 - 5 min read