There are three BIG benefits of a reverse mortgage. Keep reading to learn why you should set up a reverse mortgage right now.

#1: Existing Mortgage Payments

Control your existing mortgage payments. Suspend, stop, and change payment amounts on a senior’s existing mortgage. In this area of uncertainty, gain control over the biggest expense most folks have: housing. A reverse mortgage loan allows seniors to pay what they want, as opposed to an inflexible “forward” mortgage with forced payments each month or face foreclosure. HECMs require only on-time payments of taxes to the county and insurance coverage on the home.

#2: Home Equity

Access home equity for additional cash-flow and security in uncertain times like these. Once a certain amount of equity access is set up with a reverse mortgage, it doesn’t fluctuate up and down like the stock market. As a matter of fact, due to government mortgage insurance, this amount of equity access doesn’t even change with home values. It runs completely independent once it’s set up. Even if your home is upside down in value, the credit line on a HECM will never be reduced, suspended, or taken away. Reverse home mortgage credit lines have growing credit limit increases that cannot be stopped or taken away either. It’s basically an insurance policy and access to a certain percentage of your home’s current equity.

#3: Assist Friends and Family

Be able to help family and friends without burdening the senior homeowner. Today, it was reported that almost 3.3 million unemployment claims were filed in the latest weekly jobs report. Many of those claimants are children and grandchildren affected by the Coronavirus and related shut-downs. Accessing home equity is a way for parents and grandparents to help their loved ones without creating an additional monthly bill that must then be factored into their retirement cash flow.

Other Benefits of a Reverse Mortgage

Leveraging the use of a Home Equity Conversion Mortgage during the process of downsizing or relocating to a new home can benefit your financial picture for the rest of your retirement. How can you utilize the benefits of a reverse mortgage and purchase a home? The first step towards your plan is to seek out reverse mortgage lenders. Get in touch with  Certified Reverse Mortgage Professional®, Chris Handy.

As a multi-state Certified Reverse Mortgage Professional®, Chris Handy will help you thoroughly understand what a Home Equity Conversion Mortgage is. Remember, a Home Equity Conversion Mortgage is simply a reverse mortgage for seniors with no required payments. The senior qualifies for a certain % of the home’s value for this loan. The same method can be applied to a home purchase. Reverse mortgage lenders will provide a percentage of the home’s value, and the buyer brings in the rest in the form of a down payment.

Increase Your Buying Power

Home buyers often pay cash with the goal of having no mandatory mortgage payments.  If a home buyer has $300,000 maximum to pay towards a new home, they might be able to look at homes that are $600,000+ and still accomplish that same goal of no monthly payments.

Save Cash and Keep it Liquid

That same buyer may purchase a home for $300,000.  Instead of spending all their liquid cash to avoid mortgage payments, they may have to only put down a fraction of this amount and keep the rest liquid in an investment account to access during the remainder of their retirement.

Payments Made May Be Withdrawn

Using the credit line option on a reverse mortgage loan, payments are not mandatory but may be made.  Any payments applied to the loan balance will also be available for withdrawal via a growing credit line.  The amount of growth is the same as the interest rate on the HECM. For example, a homeowner makes a payment of $20,000 during a year in which interest rates are 5%. In 12 months, there would be $21,000 available to drawback out of the reverse mortgage if the homeowner so desires. Payments stay liquid.

The amount of down payment required is a formula based on the age of the youngest homebuyer, current interest rates, the home’s purchase price, and the closing costs that are customary for the area.

Keep in mind that even when you use reverse mortgage lenders, you as the titled owner are still required to pay taxes, insurance, and any upkeep on the home (don’t let it fall into disrepair).

Reverse Home Mortgage Scenario

Jim and Rachel have decided to relocate and downsize from their 4-bedroom family home. They have $400,000 from the sale of their previous residence. They initially intended to pay cash or maybe take out a small mortgage if they find a property that they like for more than $400,000.

After deciding to utilize a Home Equity Conversion Mortgage purchase, they find a home for $550,000. They put $200,000 down and finance the other $250,000 through reverse mortgage lenders. At this point, payments were optional, and they invested the remaining $200,000 from the sale of their previous home with their financial advisor. They decide to pay $600 per month while their finances were strong, and they had two incomes. After 10-years, Jim, unfortunately, passed away. This cut the household income for Rachel, but the payments they made plus growth left Rachel $101,000 on a credit line to drawback out tax-free as she needed.

Hire a Certified Reverse Mortgage Professional®

If you are interested in learning more about how you or your loved ones can benefit from setting up a reverse mortgage, connect with Chris Handy today!

Leave a Reply

Your email address will not be published. Required fields are marked *