Your home is your nest egg which can often yield money for your retirement. But let's face it, a reverse mortgage isn't for everyone. "Is a reverse mortgage right for me?" The following questions can help you ascertain if a reverse mortgage will work for you:
• Are you looking to stay in your home for the foreseeable future?
• Would downsizing to another home make life easier?
• Would extra money enable you to do the things you want to do?
• If there are two borrowers and one passes away, would you be able to pay your taxes, homeowner's insurance, and keep up the house in the condition it was when you took out the reverse mortgage?
• Are there current medical or in-home care situations where a reverse mortgage could help defer the cost?
• Would you like to zero out your existing mortgage and pay no further monthly mortgage payments?
If you answered "Yes" to the above questions, perhaps a reverse nortgage might be an option worth your consideration. A common worry about reverse mortgages is concern for your heirs. Discuss reverse mortgages with your family and trusted advisors. Perhaps there are other options that will work better than a reverse mortgage.
The following are additional questions potential borrowers ask about reverse mortgages:
If I choose a line of credit, does the bank pay me interest on the unused portion?
No. The lender does not pay interest on a reverse mortgage. However, the lender provides a Credit Line Growth rate (a percentage) on your unused line of credit. This is why a reverse mortgage has a huge advantage over a Home Equity Loan (HELOC).With a HELOC, you have to refinance if you want more money. The HECM/reverse mortgage has a growing line of credit (compounded) at the same rate as the interest charged on the loan plus an additional 1/2%. Therefore, if left alone, there will be more money to access in the future than when your reverse mortgage funded.
Would a "Living Trust" be eligible for a Reverse Mortgage? What about a Life Estate or Guardianship?
A homeowner who has put his or her home in a revocable living trust can take out a reverse mortgage upon document review by the underwriter. The reverse mortgage Lender must review the appropriate documents as part of the loan process and, in some cases, may even approve irrevocable trusts though rarely. A Life Estate is acceptable for a reverse mortgage as well as power of attorney and guardianship.
Nothing in the HECM guidelines states you cannot use an irrevocable trust. However, an irrevocable trust may not qualify for a reverse mortgage if one of the current beneficiaries does not meet HECM guidelines. All current beneficiaries of a trust must be HECM eligible for a HECM to be done on the home. In addition, irrevocable trusts can pose a problem when the trust does not allow invasion of the principle by the settler.
Can a reverse mortgage be refinanced?
Yes, as long as there is enough equity to refinance. Interest rates going down, getting older, house values going up all determine whether or not it is practical to do a reverse mortgage refinance. There is a 5 x rule that applies to HECM refinances. The increase in the Principal Limit of the loan must be equal to or more than five times the closing costs and proceeds equal to or more than 5% of what is being refinanced. The new loan must be a benefit to the borrower and cannot take place earlier than 18 months from the time you did your first reverse mortgage it the loans was a jumbo and 12 months if it was an FHA HECM. The reverse mortgage refinance will require an entirely new application as well as reverse mortgage counseling.
Can my plan be changed during the reverse mortgage ? Yes. You can change from a line of credit to monthly payments or vice versa at any point in your reverse mortgage. You will have to sign forms changing the structure of your plan, but it can be accomplished. After all, it's your money to structure for your needs.
Reverse Mortgages and Equity Loans - Similar, But Different - Although a reverse mortgage is a lot like an equity loan, there are some significant differences. (a) With a reverse mortgage, your credit rating is not a determining factor. (b) Unlike an equity loan you make no monthly mortgage payments.(c) With an equity loan, you would have to refinance to increase your line of credit. With a reverse mortgage, your unused line of credit increases year after year giving you access to more funds without the need to refinance.
Take your time, it's your life.
It takes a little bit of knowledge and understanding to determine if a reverse mortgage is the right vehicle for you. Taking out a reverse mortgage is an important step. Don't rush it. It is a life changing decision and an important one. Refer to our REVERSE PROS and CONS page for more information!
Continue reading, talking, evaluating, and request your free reverse mortgage information and free reverse mortgage quote.
Questions? Call Advisors Mortgage! Advisors Mortgage: 888-843-9797 or 631-804-9044
When NOT to get a reverse nortgage:
• An equity loan (if you qualify) may be a cheaper way of getting cash out of your home as closing costs may be lower.
• If your primary goal is fixing up your home and a community loan provides adequate funds, a reverse mortgage is not your best option.
• If you are ill and assisted living or a nursing home is imminent and you will be out of your home for 12 consecutive months, do not choose a reverse mortgage as this will trigger a demand for payment of the reverse. The key word here is "consecutive".
• If your financial situation will preclude you from paying real estate taxes, insurance, and maintaining your home, forego a Reverse Mortgage.
• If your children invite you to live in their home and spend your remaining years with them, this may be a better alternative than staying in your home.
• If you live with someone (not including non-borrowing spouses) not on the loan who won’t be able to live within the home should something happen to you.
NOTE: If you fail to pay your taxes and homeowner's insurance or fail to maintain your property, you could lose your home.
If a reverse mortgage is not for you or if you are a first time home buyer and simply want to purchase a home or need a refinance, Advisors Mortgage has conventional refis, VA, FHA, 203k loans, construction loans, LIBOR loans, loans for first time home buyers, and loans for those with not so perfect credit.
ADVISORS MORTGAGE GROUP. WE TAILOR LOANS TO MEET YOUR NEEDS.
3330 Park Avenue, Suite 1, Wantagh, New York 11793
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