New trends in reverse mortgages increase access to home equity
Reinventing the reverse mortgage: A new program makes home equity more accessible than ever
If you’re shopping for a reverse mortgage, did you know that there are other options besides Home Equity Conversion Mortgages (HECMs)? While the majority of reverse mortgages are HECMs, there is a new trend in the industry: Companies are creating their own new and innovative products to give customers access to more funds, as well as other features not available with a HECM.
Many older homeowners and homebuyers are using reverse mortgages as a smart financial tool to tap into the valuable equity in their homes in order to gain more financial flexibility and peace of mind. But HECMs have certain limitations that can preclude some borrowers from taking advantage of their benefits. To expand eligibility to a wider group of homeowners, Reverse Mortgage Funding LLC (RMF) has launched an innovative new product, Equity Elite Reverse Mortgage.
What are the advantages of Equity Edge over a HECM?
- Loan limits of up to $6 million, compared to the HECM limit of just $679,650
- No Mortgage Insurance Premium (MIP) fees mean the potential for lower up-front costs
- Borrowers eligible at age 60 — you don’t have to wait until you’re 62!
- No FHA approval* necessary on condominium communities, so more condo homeowners and homebuyers qualify
Available currently in California, Florida, New Jersey, Oregon, and Virginia. Equity Elite will be rolling out to additional states in the near future.
Home equity: A significant asset for many
According to the latest U.S. Census data, home equity represents about two-thirds of the total net assets for the average retiring American couple. Yet many still gravitate toward traditional home financing solutions, such as a home equity loan or line of credit, when they need access to funds for improvements, remodeling, healthcare costs or other expenses. These traditional financing options are not always the best choice, as they require you to make monthly payments on the amount borrowed.
In comparison, a reverse mortgage has a flexible repayment feature, which has made it grow in popularity as a strategic financial planning tool. You can pay as much or as little as you like each month toward principal and interest, or make no monthly loan payment at all. Your reverse mortgage balance, including accrued interest and fees, does not have to be repaid until you pass away or move out, as long as you meet your loan obligations (which includes keeping current with property-related taxes, insurance, upkeep, and any applicable homeowners association fees).
How borrowing amounts are calculated
The amount that you qualify for in a reverse mortgage is based in part on home value. A traditional HECM reverse mortgage caps the amount that one can borrow at $679,650 — putting those with higher-value homes at a disadvantage. HECMs are also available only to homeowners age 62 and older. Equity Elite, in comparison, is specifically designed to help those with homes valued at $700,000 or more to access more equity, and also allows homeowners as young as 60 to qualify.
Regardless of which type of reverse mortgage you choose, the funds can be used in countless ways — from refinancing a current mortgage or consolidating debt to covering expenses like home renovations, unexpected healthcare costs or the purchase of a home. By taking advantage of equity you’ve built up over time, you can also delay the use of the money you’ve saved for retirement. In comparison to a HECM, Equity Elite makes these financial benefits accessible to a broader array of homeowners, sooner.
Innovation born from necessity
Since its introduction in 1961, the reverse mortgage has developed into an important loan option that has now been used by more than a million households. The industry innovators at RMF, focused on meeting the needs of even more homeowners and buyers as they approach retirement age, developed Equity Elite as a powerful tool to do just that.
To determine if an Equity Elite Reverse Mortgage could fit into your retirement strategy, connect with RMF — call 877-485-1359 today for a convenient phone appointment with an experienced reverse mortgage specialist.
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 Elite currently is available only for eligible properties in select states. Please contact your loan originator to see if it is currently available in your state.
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.