When you are considering a reverse mortgage, you need to review the reverse mortgage pros and cons. Review the following information which can aid you in your decision.
The PROS of Reverse Mortgages:
• No monthly mortgage payments! Reverse mortgages can eradicate existing monthly mortgage payments or liens. These will be transferred to your reverse mortgage balance and interest will accrue throughout the life of the loan.
• Tax free income insured by the Federal Government which continues as long as your home is your primary residence. Freedom from stress and worry.
• Change your plan at any time from a line of credit to monthly proceeds or a combination (depending on what remains.)
• Unlike an equity loan there is no minimum credit score requirement, although a credit report is required on all loans.
• You can remain in your home as long as you wish no matter what is owed the lender. You can never be forced out of your home as long as your real estate taxes and homeowner's insurance are paid and as long as you maintain your home according to FHA requirements.
• The HECM Line of Credit (LOC) option has many advantages for the senior borrower. First, the line of credit grows over time at the SAME EXACT rate as the interest rate on the loan. If you let the line sit there untouched for say five or ten years, it will be substantially larger at the end and ready for you to use. (See next section.)
• You can refinance your reverse mortgage as many times as you like as long as there is enough equity in your home to do so and if all the required HUD rules for the HECM refinance indicates a significant benefit to the borrower.
• Reverse mortgage are non-recourses loans. You can never owe more than your home is worth as the home is the only collateral. The HOUSE stands for the DEBT. Upon your passing, the reverse mortgage debt will not pass to your estate, and they will only be required to pay back the debt should they wish to sell or keep the home.
• Reverse mortgages have safeguards: capped interest rates, a limitation on fees, HUD counseling, asset protection (non-recourse loan), etc.
• NON-RECOURSE: You can never owe more than the home is worth. And none of your assets can be seized to repay the reverse mortgage debt. Whether you have bank accounts or investments, they cannot be used to satisfy the reverse mortgage balance because the HOUSE is the ONLY collateral that was used to secure the reverse mortgage as a security interest. Your HECM closing documents contained in the Mortgage Note states:
"11. Borrower shall have no personal liability for payment of the debt secured by this Security Instrument. Lender may enforce the debt only through sale of the Property. Lender shall not be permitted to obtain a deficiency judgment against Borrower if the Security Instrument is foreclosed." (MODEL MORTGAGE FORM ADJUSTABLE RATE (HOME EQUITY CONVERSION), Uniform Covenants #11.
Questions? Call Advisors Mortgage! 888-843-9797 or 631-804-9044
Not having to pay any monthly mortgage payments on the HECM is a great advantage. But what's even better is the LOC, Line of Credit feature. You can draw on your credit line whenever the need arises whether to enjoy life more or just to pay some bills. Here are some of the advantages of the HECM line of credit as compared to a HELOC/Home Equity Line of Credit:
Both the reverse mortgage line of credit and the conventional HELOC only accrue interest on monies drawn. But only the reverse mortgage line of credit has a growth rate on the unused portion of funds. The unused HECM line of credit grows over time at the compounding interest rate charged on the loan plus 1/2%. This gives borrowers greater borrowing power as the amount of money available for future access grows larger year after year. So, for example, if you took out the HECM line of credit at age 62 or 65 and left it untouched for 10 or 15 years, your money would have grown considerably. At that point, you can withdraw all or part of your remaining line of credit. If you do not use the line, it is not owed. (On the FHA HECM, the second draw of funds from the line of credit would occur 365 days after the funding of your loan).
Another advantage to the program is that the HECM line of credit stays open and cannot be closed at the lender's discretion. The line of credit stays open so the funds are there when you need them.
Financial planners used to give reverse mortgages a bad rap, but since the HECM safeguards have been enhanced from what they were before, this is no longer true. Reverse mortgages can be a valuable financial planning tool which can help retirees cover many of their lifestyle expenses and also enhance their retirement portfolios. Speak with your financial planner and advisor about the reverse mortgage and get their professional opinion. It may work well or may not.
Rather than obtaining your reverse mortgage out of sheer need or waiting till you are older, some financial planners suggest taking it out earlier to avoid future financial difficulties. Additionally, taking out the HECM sooner than later maximizes the growth of the HECM line of credit for those with a significant line of credit. After a considerable time and the growth rate on your line of credit, the amount available in the line would be larger, therefore, the line of credit is a great option for those not needing the money right away.
HUD has designed the reverse mortgage to ensure borrowers have all the resources they need to fulfill all the requirements of the loan as it progresses throughout their life. Many financial planners who study income plans now see the benefits of a reverse mortgage and the advantages of using the home's equity for retirement income. Be sure to discuss your options with your family and financial advisor.
Advisors Mortgage will provide you with a free HECM or proprietary jumbo proposal, and since this loan can be tailored to YOUR financial needs, we will work up different scenarios so you can choose which one works best for you. Advisors Mortgage is here to a answer your questions and concerns. Be among the many who enhanced their lifestyle and retirement portfolio with a reverse mortgage.
• An equity loan may be a cheaper way of getting cash out of
your home as closing costs will be lower. But there will be a monthly mortgage payment.
• If your primary goal is fixing up your house and a community loan can provide adequate funds, that may be a better option.
• If you are ill or disabled and assisted living or a nursing home is imminent, do
not choose a Reverse Mortgage. If you leave your premises for 12 consecutive months and no other borrower remains, the loan will be due.
• The HECM, FHA reverse mortgage can be an expensive loan due to the 2% upfront mortgage insurance premium. This 2% fee is multiplied times the appraised valued on the home. Even though this is financed along with most of the closing costs, it is still a cost.
Eligibility for Medicaid: Reverse mortgages do not affect Medicare or Social Security. But they can affect your eligibility for Medicaid benefits. Check with your financial planner or Medicaid administrator.
• If your children invite you to move into their home and spend your remaining years with them, this might be an option. Many seniors find themselves able to move in with their children and benefit their heirs by doing so.
HECM COUNSELING IS REQUIRED. Your HUD-approved reverse mortgage counselor will aid you in determining how well a reverse mortgage will work for you and will review your alternatives. The reverse mortgage cannot proceed without this important HUD-required safeguard.
Whether it's a mortgage or another important matter that requires a decision, thinking and considering options has to be part of the equation. Thoroughly comparing the advantages and disadvantages of something will usually produce a good decision. What is good for one person may not be good for someone else. It has to do with YOUR perspective, the way you look at things, and what best works for you. We all see the world differently. We weigh our circumstances and consider our options. Consider the reverse mortgage. It might not be for you, but then again, it just might work to your benefit.
Questions? Call Advisors Mortgage! 888-843-9797 or 631-804-9044
Asking the right questions can help you determine if a Reverse Mortgage is the right vehicle for you. After all, a Reverse Mortgage is not for everyone.
* Am I going to stay in my home for the foreseeable future?
* Do I want to leave my home to my children and grandchildren?
* Am I concerned about a relative or friend or renter whose living arrangements will change when I pass away due to me having a reverse mortgage?
* Am I able to maintain my home and pay my taxes and insurance if I previously had these in escrow at my mortgage company? Do I understand that I could lose my home if I fail to pay my taxes and my property insurance?
* If I have no mortgage and need money for home improvements, perhaps $20-30,000, does a reverse mortgage make sense?
* Have I considered alternate options other than a reverse mortgage?
* How would my life change if I could get rid of my mortgage payments and have money left over each month to do the things I've been wanting to do?
* Will the reverse mortgage change my life enough for me to warrant getting a reverse mortgage?
All these questions are legitimate questions senior borrowers might consider. Consult with family and trusted advisors. A free quote will give you the numbers and figures so you will see firsthand how much money is available to you.
First time homebuyers, VA, FHA, reno loans, commercial, loans, condos, coops (in NY), horse property loans, mixed use, bank statement loans! For more info, call 888-843-9797 or 631-804-9044.
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