Counting Down the Top 10 Reverse Mortgage Facts
With the one-two punch of inflation and economic instability, most people are concerned about having the funds to sustain a comfortable retirement. For many, a reverse mortgage loan can support the lifestyle you’ve worked so hard to achieve.
Some people take out home equity loans, but a reverse mortgage can help retirees generate extra money or reduce your living expenses by converting a portion of your home equity into income-tax-free funds. Note: Not tax advice; consult with a tax professional. A licensed reverse mortgage specialist from Reverse Mortgage Funding LLC (RMF) can help you decide if you’re the right candidate. Call us at (888) 277-1567 when you’re ready to set up a meeting.
But before considering a reverse mortgage solution, here are 10 things you need to know:
- Unlike a traditional home equity loan or home equity line of credit, a reverse mortgage has a flexible repayment feature: You can pay as much as you like toward principal and interest each month, or defer repayment — the choice is yours.
- While monthly mortgage payments are optional, as with any mortgage the borrowers must meet their loan obligations, keeping current with property insurance, taxes, and maintenance.
- If you move, pass away or sell the home, the loan balance must be repaid.
- You can opt to pay down your principal and interest if and whenever you choose; no pre-payment penalties apply.
- The home must be your principal residence and meet standards on property type and condition.
- When you take out a reverse mortgage, the bank has a lien on your home just as it would with a traditional mortgage. As the borrower, you will still own the home, with your name on the title. As noted above, you still need to keep up with loan obligations including property insurance, taxes, and maintenance.
- Depending on your needs, you can choose to receive your funds as:
- A line of credit that offers the benefits of a traditional Home Equity Line of Credit, but with certain advantages including greater flexibility
- Monthly advances, either for a set period or as long as you live in your home
- A lump sum
- A combination of these
You can even change how you receive your available funds in the future if your situation changes. Borrowers who elect a fixed rate loan will receive a single disbursement lump sum payment. Other payment options are available only for adjustable rate mortgages. In certain states, RMF’s Equity Elite® loan provides a fixed-rate term payment option.
- A reverse mortgage can improve your monthly cash flow, and help you pay for large expenses in today’s uncertain economy. For example, you could refinance your existing mortgage and consolidate auto loans and high-interest credit card debt to reduce your bills. Funds can also be used for a new car, or a major home renovation. You can even, with a reverse mortgage for purchase, use the funds to help you buy a home that better suits your needs.
- A reverse mortgage can help you establish a “standby” line of credit that you can tap into as needed to alleviate financial worry and gain peace of mind. Think of it as an emergency fund: the money will be there when you need it most. By having the funds from a reverse mortgage line of credit available, you may avoid having to sell stocks or other assets, so you can hold onto investments and continue to collect interest or dividends.
- With a reverse mortgage loan, there are consumer protections in place to help ensure that you’re making wise choices. Among these:
- As part of the loan process, each potential borrower must meet with an independent, FHA-approved† counselor to objectively ensure that they understand the reverse mortgage process, what it entails and the individual terms of their loan.
- With an FHA-insured† reverse mortgage, known as a Home Equity Conversion Mortgage (HECM), you won’t owe more than the home is worth when the loan is repaid. This is known as the “non-recourse” feature.
- Additionally, with a HECM, there are limitations on the amount of available funds a borrower can take at closing and in the first 12 months of the loan. This is to help your home equity last longer.
Learn more about the benefits of a reverse mortgage and how you can retire more freely with this valuable financial tool.
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 4.5-star / Excellent score on Trustpilot; 4.5 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.