4 Reverse Mortgage Safeguards You Should Know

4 Reverse Mortgage Safeguards You Should Know

Taking out a Home Equity Conversion Mortgage (HECM) is a big decision to make. And, many people have asked how safe is this government-insured loan program? Although reverse mortgages aren’t right for everyone, the HECM program has many built-in protections to keep borrowers safe.

4 Reverse Mortgage Safeguards You Should Know

The following are safeguards that cover the reverse mortgage you should know – to keep your mind at peace.

The Loan is Federal Guaranteed

The fact that the reverse mortgage is federally guaranteed is one of the most prominent protection that covers this loan option. The reverse mortgage is insured by the Federal Housing Administration (FHA).

Depending on the loan program you choose, when you take out a reverse mortgage, as a borrower, you will need to pay an upfront mortgage premium. Also, you will need to finance an annual mortgage insurance premium of 50% of the mortgage balance.

The Reverse Mortgage Offers a Non-recourse Feature

Here is another borrower protection to put your mind at ease. The non-recourse feature means that even if your reverse mortgage ends up exceeding the value of your home, you won’t have to repay more than what your home is worth at the time decide to sell your home.

It also extends to your heirs as well. In the case of an unfortunate event, and you pass away, your heirs won’t have to pay more than the home’s value should they decide to sell.

Counseling

Everyone who qualifies for the HECM loan will be required to go through a Department of Housing and Urban Development-approved counseling agency. The counseling is aimed at making sure that you understand how the loan works and how it applies to your unique situation.

Counseling is also a time you can ask any question that you might have. After the counselors have assessed your knowledge of this loan, they will issue a certificate that enables you to continue with the loan application.

The Ban on Cross-selling

Under the Housing and Economic Recovery Act of 2008, reverse mortgage originators are banned from cross-selling some financial products. What this means is that they cannot originate a reverse mortgage and then ask you to buy an insurance investment or any other financial product with them.

These rules are there to protect you (the borrower) from unethical lenders who may want to compel you to purchase a financial product you don’t want or need.

Did You Know You Can Use a Reverse Mortgage in a Divorce Settlement?

Did You Know You Can Use a Reverse Mortgage in a Divorce Settlement?
Did You Know You Can Use a Reverse Mortgage in a Divorce Settlement?

I bet you never heard this one. Well, a reverse mortgage is a versatile financial tool that you can use for almost anything. 

While discussing with the lawyers about which spouse will keep which asset, a reverse mortgage can be used to relieve some of the financial burdens on both spouses while allowing them to live separately.

Living Separately With a Reverse Mortgage

Many couples who divorce often find that they are unable to support the costs of a home that was initially supported by both partners now that they are independently responsible.

A reverse mortgage can help out in a situation like this. A reverse mortgage offers an option to choose how you want to withdraw the equity in the home. You can decide to take the loan as a lump sum or a series of partial payments.

If your spouse prefers to stay in the home, but cannot meet the monthly payment requirements, a reverse mortgage can be used to pay off the mortgage, with the remaining proceeds going to the moving spouse.

Reverse Mortgage for Purchase

In a case where the couple doesn’t want to stay in the home, a reverse mortgage purchase loan gives you leverage to purchase a new home while taking out a reverse mortgage in a single transaction.

Doing this will enable one spouse to move to a new home through the reverse mortgage while the other spouse can receive some of the remaining cash proceeds. It works well where the borrower is downsizing.

What If I Already Have a Reverse Mortgage?

In a situation like this, where a couple already has a reverse mortgage, and they decide to get a divorce later, they will be required to submit the divorce decree to the loan company.

At this stage, one of the spouses will be permitted to be removed from the title of the home, allowing the loan in the remaining spouse’s name.

To learn more about how you can use a reverse mortgage in a divorce settlement, talk to our certified professional at Reverse Mortgage Answers.

How Long Your Money Will Last in Retirement?

How Long Your Money Will Last in Retirement?

Many people who want to retire ask a lot of questions, and one of them is, “how long will my money last in retirement.” 

The question is understandable since most retirees will not be working to earn, so they want to know how long their money will last them until they die. And probably leave something for their family.

Well, the question has no general answer. However, it depends on certain factors. Below are some factors to consider that will determine how long your money will last in retirement.

How Long Your Money Will Last in Retirement?

Healthcare

Soon-to-be retirees wrongly assume that Medicare will cover their health care bills. However, they don’t realize they will still have to pay for Medigap insurance and their prescription drug.

Retirees who require at-home care or have to be in nursing homes will have their money run out faster. The average cost to stay in an assisted living facility is $3,500/month, and many can stay for months or even years.

Where You Live

Living in a state like California or New York means that your money will run out faster compared to retirees in the South or Midwest. For instance, $1 Million in Alabama is likely to last up to 26 years or more, but only about eleven years in Hawaii.

Taxes, both local and state, also have a huge impact on your retirement savings. If you live in an area with high property taxes, you will have to pay more in taxes every year than your peers in a state with lower property taxes.

Housing and Other Expenses

How long your money will last in retirement will depend on your living expenses, the biggest of which is housing. High housing expenses will cause you to run out of money faster than expected.

During retirement, unless you want to live a boring life, you might want to have some fun; take cruises with your spouse, go golfing every week, or enjoy a good meal in a local restaurant from time to time. All of which require money.

Getting a Reverse Mortgage Will Help

Getting a reverse mortgage will help your money last for a very long time while having fun-filled retirement. You can live your life on your reverse mortgage proceeds while you allow other retirement assets to grow in value.

There are a lot of things you can use a reverse mortgage without worrying about running out of money in retirement. Talk to our licensed experts today.

Investing With a Reverse Mortgage

Investing With a Reverse Mortgage

Most Americans usually run out of money in their retirement years before they pass away. For these people, their only income is the social security check they receive monthly.

For the ones who have a 401 (k), IRA or other forms of retirement savings, they will take from these assets as soon as they retire. This isn’t usually the best option.

Investing With a Reverse Mortgage

Read on to learn how a reverse mortgage can be an investment tool to help you in your retirement years.

Getting a reverse mortgage can present you an opportunity to avoid taking from those assets by using the equity in your home to supplement your income through your retirement years.

A report by CNBC reveals that an average American would need about $1 Million in assets to retire without outliving their savings. Many people feel cheated out of their retirement because they use up their assets so fast, especially the 401 (k) s and IRAs.

The funds in those accounts are blown so quickly because they are easy to access when people reach retirement age. 

Most retirees feel pressured to utilize assets immediately instead of spreading them out and using them as one would use a monthly paycheck.

A reverse mortgage offers another solution in this case. You can use a reverse mortgage as your sole source of income, allowing your investments to increase in value over time.

Reverse mortgages are great assets for various reasons. They will not only get rid of your monthly mortgage payments, but they will also help to increase your monthly income by supplementing the money you get from your retirement savings.

Assuming you have put money into your retirement savings as well as into your home, you can use that money in your home to help you gain more freedom in your retirement. Doing this will help you worry less about running out of money in your retirement years.

Talk to our licensed specialists today for more info about how you can use a reverse mortgage for investment.

The Best Time to Get a Reverse Mortgage

The Best Time to Get a Reverse Mortgage

The reverse mortgage offers incredible flexibility whether you’re looking to purchase a new home, get rid of an existing mortgage, or you’re just looking for an extra cushion for your retirement funds.

The Best Time to Get a Reverse Mortgage

Irrespective of what your retirement plan looks like, a reverse mortgage may be able to enhance a future financial situation for you. 

However, just like everything in life, timing is equally important when it comes to getting a reverse mortgage in Maryland.

There are good times to get a reverse mortgage and there are great times to get one. The preceding points will point out the best time to get a reverse mortgage.

Early Bird

You could get a reverse mortgage as a lump sum or choose to get it as monthly disbursements to assist with immediate expenses while allowing other investments to grow in value.

You could also leave your line of credit alone. Doing this will cause the unused funds to increase in value over a period of time and allow you more money to access in the future. These funds will not waver based on your home value.

The earlier you establish your line of credit, the more time it will have to grow in value. This is why it is important to get a reverse mortgage as soon as possible.

Do You Need Money Now?

Although the HECM line of credit is a great tool for long-term planning, sometimes the money from a reverse mortgage is required for an immediate need.

If an immediate need arises, it would make more sense to get a reverse mortgage as soon as you can get your hands on it. While there are many other financial options you can access, a reverse mortgage is a relatively quick way to access a lot of funds depending on your home equity.

Pay Attention to Current Economic Trends

Take certain economic trends into account when deciding on a reverse mortgage. For instance, it is definitely worthwhile to pay attention to fluctuations in home values.

When your home is highly valued, the proceeds from a reverse mortgage will also be higher. Likewise, when the interests are low, you could also get access to more money.

To know more about the best time to get a reverse mortgage, speak with one of our licensed specialists and a financial advisor.

7 Questions You Should Ask When Considering a Reverse Mortgage

7 Questions You Should Ask When Considering a Reverse Mortgage

Getting a reverse mortgage is a big decision. Therefore, it is important to have all the information about the loan. Here are the questions you should ask when you’re considering a reverse mortgage.

7 Questions You Should Ask When Considering a Reverse Mortgage

Why are my getting a reverse mortgage?

Think about your retirement goals and your current financial situation. How will a reverse mortgage help you in your personal and financial life? Our licensed specialist at Reverse Mortgage Answers will better customize a loan for you if they know the reason you need a reverse mortgage.

How do I intend to use the loan?

Having an idea of how you intend to use the loan will help you to choose the right reverse mortgage option. If you have an immediate need, you may benefit from a fixed rate that gets you a lump sum.

However, if you want to build an emergency fund or have access to money in retirement, and an adjustable line of credit that grows in value over time may be a better option.

Can I uphold my financial responsibility?

When you get a reverse mortgage, you must continue to pay property taxes, home insurance, and maintenance costs. When you are not able to do this, it may result in foreclosure.

Do I qualify?

The basic qualifications needed to access a reverse mortgage are: you must be above 62 y/o, own a home, and have enough equity in the home. If you aren’t sure about your home equity, give us a call. Our licensed professionals are always ready to assist.

How much do I qualify for?

For a more accurate estimate of how much you qualify for, call a licensed reverse mortgage specialist. However, you can get an estimate using our online reverse mortgage calculator.

Do I know the myths and facts surrounding a reverse mortgage?

There are quite a number of reverse mortgage myths out there, and you should know the facts too. Here are some facts you should know; you remain the homeowner and reverse mortgages are not a loan of last resort.

Who should I work with?

When it comes to decisions relating to your finances, you need a company you can trust – a company with years of experience. Reverse Mortgage Answers works with you every step of the way to ensure he you choose the best option for your retirement and financial goals.

6 Ways You Can Use a Reverse Mortgage

6 Ways You Can Use a Reverse Mortgage

Reverse mortgages are a type of mortgage that can be used to solve immediate needs or plan for the future. The purpose of a reverse mortgage always depends on your individual situation.

While there is a wide range of ways for you to use a reverse mortgage, here is a list of six ways people use reverse mortgages.

6 Ways You Can Use a Reverse Mortgage

Pay off Your Existing Mortgage

You can use a reverse mortgage to pay off an existing mortgage and you won’t be required to make any monthly payment.

Even when your traditional mortgage is paid off, you still have to pay your property taxes, insurance, and home maintenance cost to avoid foreclosure.

Make Home Improvements

As our home gets older, some parts may require special attention. Parts such as the roof, pipes, and appliances may require an update or a full replacement. A reverse mortgage can be used to pay for – or curb this cost.

Allow Other Assets to Grow in Value

Like a reverse mortgage line of credit, your other retirement assets can grow in value and provide access to more money when they are left to increase.

An example of this is social security. If you need cash to survive with while you avoid touching money from other assets, you can use money from your reverse mortgage.

Purchase a Home

You can use your reverse mortgage to purchase a home without having to make a mortgage payment for as long as you live in the home. However, you would be required to make a down payment.

You would also be required to pay property taxes, insurance and maintenance cost on the new home.

Create an Emergency Fund

Unexpected expenses can drain your savings. When you get a reverse mortgage you don’t have to touch your savings. You can have a fully-funded emergency resource available right away.

Travel

Many seniors want to travel more after retirement, but this can be very expensive – depending on the location. A reverse mortgage can be used to fund this adventure. However, responsible use is recommended.
There are a lot more you can use a reverse mortgage for. If you want to learn more, give our licensed professionals a call today.

Reverse Mortgage Myths: Dispelled!

Reverse Mortgage Myths: Dispelled!
Reverse Mortgage Myths - Dispelled!
Shot of a mature woman hugging her husband

Myth 1

When You Get a Reverse Mortgage, You Lose the Title to Your Home

You don’t give away ownership of your home when you get a reverse mortgage. Just like any other mortgage, your name remains on the title. Of course, you still have to pay property taxes, insurance, and maintenance expenses to avoid foreclosure.

Myth 2

You Need a Certain Credit Score to Get a Reverse Mortgage

Reverse mortgages do not have a specific credit score target to get access. Although your credit score history will be accessed through Financial Assessment procedures, a strict credit score is needed to qualify.

Myth 3

You Can’t Get a Reverse Mortgage because You Already Have a Mortgage on Your House

Reverse mortgages can eliminate any monthly mortgage payments you currently have. However, homeowners will still keep up to date on property taxes, insurance, and property maintenance to avoid foreclosure.

Myth 4

My Offspring will have to Deal With Paying Back the Loan

The truth is that your offspring have several options they can choose from when it comes to repayment. They can sell the home to pay off the loan and keep any remaining money from the sale.

A second option is, they can purchase the home for the amount owed or 95% of the appraised value, whichever is lower. They also have the option of walking away from the home entirely if they choose to.

Myth 5

Reverse Mortgages are Only for Seniors with a Certain Income Level

A reverse mortgage is not designed for one type of person or situation – it depends on your unique financial situation. The truth is that there are many seniors with varying levels of income that choose to get a reverse a mortgage.

While some people believe that a reverse mortgage is a ‘last mortgage’, there are different reasons why people get these loans.

Myth 6

The Lender will Evict me If I Outlive my Life Expectancy

This is simply not true. The first thing you need to know is that you still own your home with a reverse mortgage. The second thing is that reverse mortgage lenders don’t put any time limit on how long you can stay in your home.

By reading this article, we hope you learned something new that can better help you figure out if a reverse mortgage is right for you.

Downsizing with a Reverse Mortgage

Downsizing with a Reverse Mortgage

Have you been thinking about finding a smaller house that suits your need, moving closer to family or retiring in a warmer climate?

If you are planning for retirement, there’s a chance you’re thinking about freeing up some of the money you’ve accumulated in your home.

Downsizing will be an option for those who want to move and access more of their home equity. Usually, this would require selling their home with one transaction and purchasing a new home with another.

Using a traditional mortgage system to achieve this, there will also be monthly mortgage payments in addition to other expenses. Sounds like a hassle, right?

Let’s look at a better approach to this.

A Built-In, Two-For-One Kind of Deal

Reverse for purchase or HECM is a special type of reverse mortgage that allows qualified Americans, aged 62 and above, to purchase a new home with no monthly mortgage payments.

This special type of reverse mortgage is a federally insured loan built to help older adults reach their financial goals when buying a new home. Instead of downsizing (having to go through multiple transactions and stress of having new monthly payments), you can buy a new home with one transaction and no monthly mortgage payments.

To have access to this benefit, you’ll provide a down payment using your savings or money from the sale of your current home. This provides equity for a reverse mortgage to cover the rest of your new home’s value.

The down payment is usually less than half of the new home’s value. This means that if you want to downsize using a reverse mortgage, you could sell your home and invest in a more modest property for half its value with no monthly mortgage payments. For as long as you live in the new home as your primary residence, the reverse mortgage will not come due. However, interest will increase slowly, just like any other loan.

If for any reason you choose to sell the home or move out, the reverse mortgage will come in due, and the loan will need to be repaid. However, since it is a federally insured loan, you will always be protected, no matter what the loan balances become. It does matter if it exceeds the value of your home, you will be able to repay the loan in full by selling the home.

The Reverse Mortgage Lets You Do Both

When people compare getting a reverse mortgage to downsizing, they talk as if they have to do either one or the other. But the reverse mortgage is a flexible loan – it allows you to purchase a new home while accessing the money in your old home, so there’s nothing stopping you from selling a high-value home and then using your reverse mortgage to buy a smaller home. Doing so allows you to bypass monthly mortgage payments.

When you do this, you won’t have to deal with repaying the reverse mortgage until it comes due, thus making it a great tool for downsizing and preparing to settle in for retirement.

Reverse Mortgages Are Not Just for Low Income Seniors

Reverse Mortgages Are Not Just for Low Income Seniors

When it comes to mortgages, reverse mortgages don’t have so much of a good reputation. As a matter of fact, many Americans retired or not, sees reverse mortgages as a ‘loan of last resort’ or a loan to take out when there are no other options left. Others see the reverse mortgage as a loan taken out by either poor or uneducated people.

Reverse Mortgages Are Not Just for Low Income Seniors

What these people fail to see is that the reverse mortgage is a way to use the untapped equity in the home they’ve paid for throughout their working years.

The criticism of reverse mortgages is not really about the product itself, but with the way that people use them. People tend to use this lump sum payment to buy something they’ve always wanted. This why the Federal Housing Administration requires borrowers to undergo a counseling session before entering a reverse mortgage contract.

A reverse mortgage can be seen as a flexible alternative to the more traditional forms of retirement planning such as social security, 401ks or stock; and with more Americans living a lot longer than ever before, flexibility is essential!

For instance, if the stock market has taken a downturn, it may be time to pull funds from the reverse mortgage line of credit in order to sustain retirement expenses while the market stabilizes. Another instance would be to set up monthly reverse mortgage payments to help supplement social security payments and cover retirement expenses.

Those are two ways reverse mortgages can adapt to a retiree’s situation, not just a senior at 62, but also at 72 or 82. For example, a person planning for retirement may be saving at 62 for retirement but may need more cash flow when he turns 72, as they adjust to their new needs and wants. When they turn 82, fixed expenses may be set and monthly payments may be more attractive than they were at 72.

What we’re saying here is, things change, and so do retirement needs and a reverse mortgage is a way to, not only sustain retirement but also ensure that it is secure and worthwhile.