The Reverse Mortgage: Improving Senior Lifestyles
Reverse mortgages are aimed exclusively at the fast-growing senior population, age 62 and older. They are aptly named the Home Equity Conversion Mortgage (HECM) by the FHA, which also insures them. The HECM is available on a primary residence, which means the property owner lives in the property.
With a conventional mortgage, equity builds through steady monthly payments consisting of principal and interest. When the home is purchased, the buyer closes escrow, moves in, receives title and begins making payments. Over the years, the payments turn cash into equity.
In a refinance, the reverse mortgage does the opposite: it turns equity into cash. An HECM harvests or converts a substantial portion of value built up over the years into ready cash. The borrower gets a big check (or payment schedule) when escrow closes. When a HECM is used for a refinance, the home owner receives a substantial cash payout (or arranges a plan to receive cash payments at a later date) and continues to live in the home, retaining title. If the property has an existing mortgage, it must be paid off in the closing process. This of course reduces the escrow payout.
A reverse mortgage can also be used for the purchase of a new home. In this case, the buyer will put down some cash and then finance the balance of the purchase price with a reverse mortgage. This allows the buyer to live in the home without mortgage payments.
The reverse mortgage is an interest-bearing loan to the owner secured by the property’s value. It requires no payback until the last owner leaves the home.
If you would like more detailed information on a reverse mortgage or find out if you qualify for one, please call California Mortgage Advisors, Inc. at (800) 927-6560 or start the online application process now.
How a reverse mortgage can benefit you
As HECM’s gain popularity, competition leads to lower rates and fees. And, oh those benefits:
- No more mortgage payments
- You retain the title to your home
- No qualifying – no income or credit report in most cases
- When interest rates decline, refinancing is possible
- Your option: receive cash from equity in a lump sum; in monthly installments; as a line of revolving credit; or a combination of these
- How you use the money is your business
- The bank can never cancel no matter how long you live — as long as taxes, insurance, HOA dues and basic maintenance are kept current
- The amount you owe when repayment is made is limited by law to the value of the property. Accumulating interest cannot expose you or your heirs to an impossible situation
However, it’s important to understand that Reverse Mortgages are not for everybody.
Click here to learn more about the scenarios that my rule you out of this strategy.
How to get started
If a reverse mortgage sounds like something you can benefit from contact a California Mortgage Advisors Inc. Mortgage Advisor today at (800) 927-6560 or start the online application process now.