Beyond refinancing: Solutions to manage retirement debt
As retirement nears, it’s not uncommon to still carry some debt. Because retirement often means living on a fixed income, we all want to be in the best financial shape possible — minimizing recurring obligations like a mortgage payment*, auto loan or high credit card balances that chip away at the nest egg that took a lifetime to build.
That’s why it's surprising to learn that debt is actually increasing among older Americans, according to research from the Urban Institute. In fact, more adults than ever are retiring with outstanding household and mortgage debt.
Debt can not only derail your retirement plans; it can also have a serious impact on your health and well-being. One study found that nearly a third of people with a significant amount of debt also report severe anxiety. If not managed effectively, debt can undermine financial well-being and sabotage retirement plans.
As you’re planning for the future, it’s never too late to take steps to consolidate debt and reduce monthly loan payments.
Refinancing: A common solution to retirement debt
For many older Americans, home equity makes up a substantial component of our wealth — an estimated 25% for homeowners ages 70-79. That’s why traditional refinancing of a mortgage to reduce monthly bills is often a homeowner’s first instinct. But it’s not always the most effective choice.
For those 62 or older, there’s also the option of a reverse mortgage loan. Offering all the benefits of a traditional bank line of credit with additional flexibility, a reverse converts part of the equity you’ve built up in your house into funds you can use today — freeing up cash to reduce monthly bills, refinance an existing mortgage, make home renovations or cover necessary medical care.
Tapping into home equity sooner than later
HECMs offer several key benefits:
- Insured by the Federal Housing Administration (FHA)**
- Unique flexible payment option helps better manage cash flow*
- Standby line of credit feature for unforeseen expenses
However, HECMs also have certain limitations that can preclude some borrowers from taking advantage of their benefits. That’s why Reverse Mortgage Funding developed an innovative loan option for individuals 60 and older. Equity Elite Reverse Mortgage was designed for owners and buyers of homes worth $700,000 or more, townhomes and condominiums. Available in certain states, Equity Elite offers borrowers many advantages, including:
- Maximum lending limit up to $6 million
- No Mortgage Insurance Premium (MIP) fees
- No FHA approval** necessary on condominium communities, so more condo homeowners and homebuyers qualify
Whether you choose a HECM reverse mortgage loan or Equity Elite, you’ll have the power to utilize the home equity you’ve built up over time — and delay the need to tap into your retirement funds.
Don’t let debt pinch your retirement savings
Taking steps to minimize retirement debt won’t necessarily eliminate it. But smart money management can help you maintain the retirement lifestyle you’ve always dreamed of. Speak with an experienced reverse mortgage specialist from RMF to find out more about leveraging your home equity with a reverse mortgage loan. Call 877-485-1359 today to set up a convenient phone appointment.
SEE WHAT FUNDS YOU MAY HAVE AVAILABLE
If you have equity in your home and believe you meet the eligibility requirements, a HECM may be the option that could help you retire smart.
*As with any mortgage, you must meet your loan obligations: keeping current with property taxes, homeowners insurance and any homeowners association (HOA) fees, and keeping your home in good condition.
**This material has not been reviewed, approved or issues by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency.
Equity Elite Reverse Mortgage (“Equity Elite”) is Reverse Mortgage Funding LLC’s proprietary loan program, and it is not affiliated with the Home Equity Conversion Mortgage (HECM) loan program, which is insured by FHA. Equity Elite is available to qualified borrowers who may also be eligible for HUD, FHA’s HECM program or are seeking loan proceeds that are higher than HUD, FHA’s HECM program limit. Equity Edge currently is available only for eligible properties in the following states: California, Florida, New Jersey, Oregon and Virginia.
Upon a maturity event, any non-borrowing individuals with an ownership interest in the property, including non-borrowing spouses, will have 90 days to purchase the property from the estate or, if the non-borrower inherits the property, pay the loan in full using any sources of funds available to them. Any non-borrowing individual, including a non-borrowing spouse, should have a plan to pay off an Equity Elite reverse mortgage upon the borrower’s death or any other maturity event. If the non-borrower is unwilling or unable to purchase the property or pay the loan in full, there is no protection for the non-borrower (including a non-borrower spouse) to maintain an interest in the home or to continue residing in the home past the maturity event and the non-borrower may be evicted upon foreclosure. The FHA HECM program has protections in place for certain non-borrowing parties, so a reverse mortgage applicant with certain non-borrowing parties should strongly consider a FHA-insured HECM loan (see HECM guidelines or ask an RMF representative for details). Under the Equity Elite reverse mortgage loan program, a maturity event occurs when the last surviving borrower no longer lives in the home as his or her primary residence for at least 12 months, the property charges (including taxes, insurance, HOA dues or any other property charges) are not paid, required repairs are not completed or the property is not maintained, or any other maturity event, as specified in the Security Instrument, occurs.