This BLOG On Benefits To Know About Reverse Mortgages For Senior Homebuyers Was PUBLISHED On September 21st, 2020
The United States Department Of Housing And Urban Development (HUD) is the parent of the Federal Housing Administration (FHA). HUD’s FHA Reverse Mortgage is a great mortgage loan program for senior homeowners and home buyers.
- Homeowners with equity in their homes can qualify for FHA Reverse Mortgage with no income nor credit requirements. Senior home buyers can also purchase their final home with a purchase reverse mortgage
- A substantial down payment is required
- A HECM – Home Equity Conversion Mortgage or commonly called a Reverse Mortgage is a loan were borrowers 62 years old or older converts the equity in their home
- As with any financial product, there are numerous misconceptions and misleading information that may cause understanding complications
In this article, we will cover and discuss Ten Top Benefits To Know 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 home:
- The truth is homeowners remain in 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
- Just 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
As long as they comply with loan terms regarding paying the taxes, insurance, maintaining the property condition, and HOA fees if applicable.
Residual Income Benefits To Know About Reverse Mortgages
Regardless of age, if homeowners chose 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 life spanning pass 99
- Thus the age 99 limit, payments will not stop until homeowners no longer live in their homes
- The surviving spouse that is listed on the 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 is used to create your need equity position to close a Reverse Mortgage – HECM loan
Please see the specify post about Reverse Mortgage – HECM for purchase.
What If Homeowners Dies
Homeowners heirs would inherit the home if that is the homeowner’s plan
- The fact is, any remaining equity in the home is the homeowner’s and/or heirs
The Reverse Mortgage – HECM is a TRUE “non-recourse” loan:
- This means borrowers can never owe more than the value of the property at the time they or their heirs sell the home to repay the Reverse Mortgage
- 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 equity position considerably
Homeowners do not need to own home free and clear of any existing mortgages and/or liens.
Why Homeowners Use Reverse Mortgages
The truth is, many borrowers use the Reverse Mortgage – HECM to pay off an existing mortgage to eliminate the monthly payment:
- Removing existing mortgages/liens on home 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
- 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:
- The residual income is the level of income that an individual has after the deduction of all personal debts and expenses have been paid
For example, a borrower in Florida with a family size of two must-have $886 in a residual income while 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 adjusts you can make, if any, to increase your rate to get to 100% or higher. Considering using the HECM loan to help. The team at Gustan Cho Associates Mortgage Group are experts in helping borrowers on 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 Mortgage News. He is also a Staff Mortgage Expert On GCA Mortgage Forum
Michelle McCue is a licensed senior mortgage banker with GCA Mortgage Group. Michelle McCue is our company’s Reverse Mortgage Expert and has consulted countless borrowers as well as loan officers on Reverse Mortgages. Michelle is also an expert on government and conventional loans and has a national reputation of being able to close loans other lenders cannot. Over 75% of our borrowers at Gustan Cho Associates Mortgage Group are folks who either gotten a last-minute loan denial or are stressing over their loan process with another lender.
This information is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD) or by the Federal Housing Administration (FHA). HECM loan guidelines have federal and state guidelines that may have additional paperwork needed for compliance or restrictions. We are not tax advisors so please see a professional tax advisor for applicable taxes, if any.