Retirement Savings Off to a Late Start? Get to Know These Options for Funding a Comfortable Future
We’ve all heard the well-meaning advice to start saving as early as possible — for emergencies, buying a home, starting a family or funding a business. But sometimes life gets in the way, and even the best intentions for setting aside money get deferred.
That’s especially true when saving for retirement, which seems so far away when you’re in your twenties. In fact, only 56% of workers are currently saving money for their later years. That means nearly half of all Americans have yet to begin planning for retirement.
Older homeowners can be especially challenged when it comes to financial matters. You may be living on a fixed retirement income, faced with unexpected medical expenses, or simply trying to map out a strategy so you don’t outlive your money.
The good news? There are various financial options available to you — especially as a retiree — to free up some of the equity in your home for available funds to use for just about any purpose. One that’s often overlooked is a reverse mortgage. This type of loan can give you a great opportunity to play catch-up and establish financial security to carry you through retirement.
You may be tempted to stop reading, because you’ve heard negative things about reverse mortgages. Unfortunately, there are a lot of common misconceptions about this important financial option that have kept people who could benefit from learning the facts, so they can make an informed decision. While a reverse mortgage is not for everyone, if you’re a homeowner who’s in or approaching retirement, it’s worth exploring.
Reverse mortgage, forward thinking
Where do you see yourself in 10 years? If you’re planning to keep your current home as your primary residence, a reverse mortgage may be the right financing tool for you.
This type of loan is available to — and designed specifically for — homeowners and homebuyers age 62 and older. It allows you to borrow against the equity in your home. In doing so, it provides funds that you can use today, or a line of credit for future needs — all while you continue to live in and own your home. As with any mortgage, there are loan obligations that must be met, including keeping current with property taxes, insurance and maintenance.
Depending on your needs, there are different types of reverse mortgage loans, the most common of which are FHA-insured* Home Equity Conversion Mortgages (HECMs). These include:
- HECM Annual Adjustable Rate. Get greater protection from rising interest rates. HECM Annual is a reverse mortgage whose interest rate adjusts only once a year, with a “lifetime cap” to ensure that your rate will never go beyond a certain percentage over the initial rate. There’s also an “interval cap” that guarantees your interest rate cannot increase by more than a certain percentage each year. And to help give you financial flexibility, you have the choice of taking your funds as a lump sum, monthly advances, a line of credit or a combination of these. It’s up to you.
- HECM Monthly Adjustable Rate. The interest rate on this HECM adjusts monthly, but it also offers more options for homeowners — including a “rate cap” that guarantees that your rate will never go up more than a certain percent over the initial rate (depending on the loan options you choose). You can select a lump sum draw, line of credit, monthly advances or a combination of these options to receive your funds. For example, you might choose to take some of your cash up front and put the rest in a line of credit, so it’s available if, and when, you need it. You will only accrue interest on the money that you actually take.
- HECM Fixed Rate. With an interest rate that’s established at the loan closing — and fixed for the life of the loan — you’ll always know exactly how much interest is accruing on your loan. However, with a HECM Fixed Rate, you are required to take all of your money in one lump sum when you close. This may be a desirable choice if you’re using your HECM to pay off a larger existing mortgage or cover other immediate needs.
If you’re in the market for a new home that will better suit your retirement needs and lifestyle, consider a HECM for Purchase. This type of loan is growing in popularity, because it allows you to use a reverse mortgage to finance the purchase of a home. Though not the right option for everyone, a HECM for Purchase can help you delay dipping into your retirement savings, improve cash flow and more easily afford a new home.
Keep in mind, there are certain limitations on using a HECM for Purchase. The lending limit on a HECM is $726,525. And if you’re planning to purchase a condominium, only units in FHA-approved condo communities qualify.
For buyers looking to purchase a higher-value property, Equity Elite is a fixed-rate, low upfront cost reverse mortgage available exclusively through Reverse Mortgage Funding as the lender. How does it compare to other reverse mortgage loans? Available in certain states, this loan option is designed for homeowners and homebuyers as young as 60**, specifically for higher-value homes, as well as condo owners and buyers.
In addition to home-buying benefits, Equity Elite can also be leveraged to:
- Refinance your existing mortgage and/or home equity loan, to reduce or eliminate your monthly mortgage payment†
- Consolidate other debt to simplify your life and reduce monthly bills
- Renovate your home to better fit your needs
†As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, and maintenance.
Securing your financial future
This generation of retirees has a growing concern about maxing out their retirement savings. According to the Insured Retirement Institute, 68% of Baby Boomers wish they’d saved more for retirement, and 67% wish they’d started saving earlier.
A reverse mortgage loan can help save an underfunded retirement and ease financial stress. To learn more about eligibility requirements for a reverse mortgage, reach out to Reverse Mortgage Funding at 888-277-1567. We’ll set up a convenient in-person appointment with an experienced loan specialist from your area who can answer all your questions.
This content is sponsored by RMF, one of the nation’s leading reverse mortgage lenders. We are dedicated to helping older Americans retire more freely, in the comfort of their own homes. As a result of our commitment to providing an extraordinary and positive customer experience, we have earned a 98% customer satisfaction rating; a 5-star / Excellent score on Trustpilot; 4.8 out of 5 stars on LendingTree; and an A+ rating with the Better Business Bureau. Call 888-277-1567 to speak with a licensed reverse mortgage specialist to learn about our retirement financing products and solutions.
SEE WHAT FUNDS YOU MAY HAVE AVAILABLE
If you have equity in your home and believe you meet the eligibility requirements, a reverse mortgage may be the option that could help you retire smart.
*This material has not been reviewed, approved or issued 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.
**Not applicable in all states; some states may impose a higher age requirement. Visit www.reversefunding.com/equity-elite for details.
This information is intended for those who are interested in financial education. This information is provided for convenience only, and RMF make no warranties concerning the accuracy or completeness of any of the information. Information is subject to change without notice, and RMF is under no obligation to provide updated information. Materials or statements made by a third party and located or posted on the Site are those of the third party and do not necessarily reflect the official policy or position of RMF. This is not financial, tax, compliance or legal advice and should not be taken or relied upon as such. Each individual should consult with his/her financial, tax, or legal professional. All mortgage origination services are provided by Reverse Mortgage Funding LLC, a state licensed mortgage lender, which is licensed or otherwise exempt from state licensing in the states in which it originates mortgage loans.
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 also may 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 and/or default 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, or any other property charges) are not paid, required repairs are not completed or the property is not maintained, or any other maturity and/or default event, as specified in the Security Instrument, occurs.