All about Reverse Mortgage Loan ~ Investment,finance for businesses

Tuesday, September 14, 2021

All about Reverse Mortgage Loan

 All about reverse mortgage loan

Reverse Mortgage Loan for a better retirement

A Reverse Mortgage Loan for Americans for a Better Retirement :

Reverse Mortgage Loan is solely dedicated to helping older Americans use their home equity for a better retirement

For all that a home gives us-things like safety, stability, security and a place to create and store our memories-one gift we tend to overlook is the future it can also give us.

You can begin to unlock that future by using some of your home's equity, which has likely increased over time, becoming your most valuable asset.

There are, of course, different ways to access your home equity, but if you're 62 or older, you may want to consider a reverse mortgage. Not only can you use it to access tax-free cash, but you don't have to repay your loan until you leave the home.

This way, you'll have the financial freedom and flexibility to design the retirement you want, whether that's paying off bills, fixing up the house, traveling or investing more, or helping out your children.

Use this helpful guide to bring greater clarity and certainty to your future, with the open invitation to call American Advisors Group anytime about whether a reverse mortgage-or another of their home equity solutions-can help you achieve a better retirement.

What Is a Reverse Mortgage Loan?

Unlike a traditional home equity loan, such as an FHA or refinance loan that you begin paying back soon after your loan closes, a reverse mortgage doesn't have to be repaid until you leave your home*. In addition to having no monthly mortgage payments, you will receive tax-free proceeds from your reverse mortgage, and you can designate how you want to receive them. Reverse mortgages were specifically designed to help those 62 and older supplement their retirement.

The most widely available reverse mortgage loan is a Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA). For higher-value homes that exceed the limit set by the FHA, borrowers may be better suited with a non-HECM loan, also known as a jumbo or proprietary reverse mortgage.

NOTE:

*You must continue to maintain your property, pay property taxes and homeowners insurance, and otherwise comply with all loan terms.

Quick Facts

More than 1 million homeowners 62 and over have used a HECM reverse mortgage to age in place.

(U.S. Dept. of Housing and Urban Development, HECM Endorsement Summary Report, 2017)

How Do You Qualify For A Reverse Mortgage ?

 To be eligible for a reverse mortgage, you must:

1.     Be 62 years or older (a non-borrowing spouse may be under age 62),

2.     Own and live in your home as your primary residence,

2.     Undergo a financial assessment to ensure a reverse mortgage can serve you as a sustainable, long-term retirement solution,

4.     Receive counseling by an independent, HUD-approved third-party to confirm you understand your obligations and responsibilities with a reverse mortgage,

5.     Maintain the property and continue paying property taxes, homeowners insurance, homeowner association and any other applicable fees.

Does Your Property Qualify?

For HECMs

1.     Single-family homes or 2-4 unit homes (You must occupy one of the units)

2.     HUD-approved condominiums*

3.     Manufactured homes that meet FHA requirements

How Much Money Could You Qualify For?

The size of your loan amount is based on three primary factors.

1. Your Age:

The age of the youngest borrower or eligible non-borrowing spouse-the older you are, the more funds may be available.

2. Your Home's Value:

The higher your home appraises at, and the more equity you have in your home, may make more funds available .

3. Current Interest Rate:

Fixed and adjustable rate options are available the lower the interest rate, the more funds may be available.

How Can You Access Your Funds?

Choose the payout plan that works best for you:

Term:

Receive monthly payouts for a fixed term,

 Tenure:

Receive monthly payouts for life,

Lump sum payout:

Maximize your cash payout,

Growing line of credit:

Use as needed, interest charged only on the portion you access.

*Available with Tenure-Based or Modified Tenure plans, so long as Borrower does not default on the loan Borrower must maintain home as principal residence, pay all taxes, insurance, maintain the home, and comply with all other loan terms. With Modified Tenure plans, lender will set aside a specific amount of money for a line of credit.

Modified plan:

Combine options for even greater control; an reverse mortgage professional can show you how.

"The entire process was very smooth and concise. It was just the boost in cash flow we needed to live a good life without dipping into our stocks and bonds. This was the perfect solution for us".

Your Reverse Mortgage Responsibilities :

Although a reverse mortgage can eliminate monthly mortgage payments (principal and interest), you must continue to maintain your property, pay all property taxes, homeowners insurance and comply with your loan terms, as you would with any mortgage. To ensure that you can meet these ongoing financial responsibilities you can establish a set-aside account that can be financed into your reverse mortgage to limit your initial, out-of-pocket expenses.

If you don't comply with your loan terms, however, your home could go into default, which could lead to foreclosure.

It's also important to note that while you can sell your home and pay off your loan balance any time without a prepayment penalty, reverse mortgages make more sense financially the longer you plan to stay in your home, as you're spreading your initial loan costs out over a longer period.

Receiving funds from a reverse mortgage will not affect your Social Security or Medicare. A reverse mortgage, however, could impact Medicaid or Supplemental Security Income (SSI), so please speak with your accountant or tax advisor for more information.

 Advantages & Strategies of Reverse Mortgage:

Advantages & Strategies of Reverse Mortgage

Homeowners are using the advantages of a reverse mortgage in multiple ways to achieve a better retirement.

Reverse Mortgage Advantages:

With a reverse mortgage, you not only remain the owner of the home, but you can live in your home for as long as you want, with no monthly mortgage payments*

a.     The home equity you access is tax free (Consult your tax advisor),

b.     Use your proceeds almost any way you wish (See Strategies),

c.      HECMS are federally insured, meaning if your lender defaults, you still receive your payments,

d.     Because reverse mortgages are non-recourse loans, neither you nor your heirs will ever owe more than your home is worth.

*In addition to maintaining your property, you must continue to pay property taxes, homeowners insurance, HOA fees, and otherwise comply with all loan terms.

 Reverse Mortgage Strategies:

The ways people are responsibly using their reverse mortgages for a better retirement are virtually unlimited.

1)     Pay off my existing mortgage to increase cash flow.

Paying off your current mortgage is a reverse mortgage requirement. By removing your monthly mortgage payments, your cash flow increases*.

2)     Renovate my home to make it safer and more enjoyable.

The right home improvements can also help maintain or even increase the value of your home.

3)     Give my retirement savings accounts more time to grow.

By tapping home equity and leaving your investment accounts intact, your assets can continue to grow through the magic of compounding interest.

4)     Delay taking my Social Security for larger payouts later.

Social Security benefits increase by a certain percentage each year if you delay your retirement beyond full retirement age. That's an effective savings plan.

5)     Build a stronger safety net.

The best defense against unexpected expenses, such as medical emergencies, sudden market downturns and other life events, is to ensure you have financial resources standing by to deal with them.

6)     Gain greater peace of mind for my long-term healthcare needs.

By creating a reverse mortgage line of credit, which grows over time, you can have money for your care when you need it.

7)     Purchase another home that will better fit my needs.

Instead of using all cash, put down only a portion of the purchase price (from your previous home's sale or from other savings and assets) and use a HECM to cover the rest, leaving you with no future monthly mortgage payments".

*You must continue to maintain your property, pay property taxes and homeowners insurance, and otherwise comply with all loan terms.

8)     Protect my portfolio in a down market.

Instead of being forced to sell an investment in a down market, you could wait for the market to rebound by using proceeds provided by a reverse mortgage to make up any shortfall.

9)     Create a lifetime income stream for my family and me.

A reverse mortgage gives you multiple payment options, including monthly disbursements for life as long as you live in your home**.

10)  Pay off other debt, like high-interest credit cards.

 Using a reverse mortgage to pay off credit cards or other high-interest debt may prove a sound financial strategy. What a reverse mortgage shouldn't be used for, is an excuse to overspend or avoid addressing what caused the debt in the first place.

**Available with Tenure-Based or Modified Tenure plans, so long as Borrower does not default on the loan. Borrower must maintain home as principal residence, pay all taxes, insurance, maintain the home, and comply with all other loan terms. With Modified Tenure plans, lender will set aside a specific amount of money for a line of credit

Stronger Safeguards and Protections :

Reverse mortgage loans come with many safeguards for your financial protection.

Limited Fees

HECM origination fees are regulated by the U.S. Department of Housing and Urban Development (HUD). HECM loan costs may vary among creditors and loan types.

First-Year Withdrawal Cap

HUD established limits on the amount of money you can access your first year to help you better balance your short and longer-term financial needs.

Credit Line Growth

The unused portion of your credit line continues to grow-giving you an incentive to responsibly access only the credit you need.

Financial Assessment

Before you can formally apply for a reverse mortgage, you will undergo a financial assessment to determine whether a reverse mortgage or another financial option can best serve you.

Counseling

You will receive counseling by an independent, HUD-approved third-party to help you explore and address whether a reverse mortgage or another alternative may offer you the best financiasolution for your needs and goals.

No Pre-Payment Penalty

You can choose to repay your reverse mortgage anytime without penalty.

Non-Recourse Loan

When repayment is due, neither you nor your heirs will ever owe more than your home is worth.

FHA Mortgage Insurance: What You Need to Know 

 1. Should you opt for a tenure plan, and you exceed your life expectancy, insurance covers the difference so you continue to be paid.

2. Should the lender default, you will continue to be paid, regardless.

3. Should the balance of the loan be larger than the value of the home when payment is due, the insurance fund covers the difference.

The Truth About Some Popular Reverse Mortgage Myths :

Although simple in concept-converting a portion of your home equity into cash while you continue to enjoy the comforts of living in your own home* certain myths and misinformation have sprung up around reverse mortgage loans. Here we address a handful of these common mistruths:

*You must continue to maintain your property, pay property taxes and homeowners insurance, and otherwise comply with all loan terms* .

The bank owns my home :

No. When taking out a reverse mortgage loan, you retain title to the property. The lender puts a lien onto the title to ensure repayment of the loan. This is the same for a reverse or a traditional mortgage.

I cannot get a reverse mortgage loan if I have an existing mortgage.

No. You just need sufficient home equity for the loan to make sense.

I won't qualify because I don't have enough income.

No. You don't have to earn a certain amount of money. Rather, you need to show you have the financial ability to pay your ongoing property taxes, home insurance and other property-related expenses.

The lender receives whatever money remains after the home is sold to pay off the reverse mortgage.

No. Any leftover funds go to the heirs or the estate.

I will lose my house if I exhaust my loan funds.

No. You cannot lose your home as long as you continue to comply with your loan terms, such as maintaining your home and paying your property taxes and homeowners insurance.

I will be restricted on how I can use my reverse mortgage proceeds.

No. You can use the proceeds for almost any purpose.

I will be taxed on my loan amount.

No. Because a reverse mortgage is a loan, your proceeds are not taxed. Consult your tax advisor for more information, however, as tax laws can change.



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