Your home equity is the portion of your property that you truly “own” and typically, your most valuable asset as a homeowner. But how do you access it and what can you spend it on?
If you are a retiree over 62, you can tap into the equity you’ve built up over many years of paying your mortgage and turn it into a loan for yourself by using a Home Equity Conversion Mortgage (HECM). With a reverse mortgage loan, you can access cash for living expenses and you don’t make any monthly payments to reverse mortgage lenders or pay the interest until you sell your home.
The cash from your HECM can be used to supplement your income, eliminate or reduce your current mortgage payment, pay off debt, buy a new retirement home, and much more. For wealthier homeowners, it also provides a tax-free source of capital.
The following article—originally published by The Denver Post—describes how a couple was able to build a mountain getaway with money from their reverse home mortgage.
Dream Big: Reverse Mortgage on Their Denver House Lets Couple Build a Mountain Getaway for Their Family
By: Mark Samuelson
Originally published: February 25, 2021
Reverse mortgages are a way for older homeowners to stop making mortgage payments while holding onto their house as a permanent residence. For a typical couple seeing pretty good equity now, that frees up a lot of cash every month—dollars that with a little planning can go towards a nice resort property for when the family wants to get out of Dodge.
Reverse Mortgage Funding
Larry and Carol Armstrong have done that, with the help of financial planner Dennis Channer: They took out a reverse mortgage on their primary residence in Denver’s Montclair neighborhood, then set aside the outlay saved on those payments to purchase a historic cabin beside a lake in the Sawatch Range that dates from the 1880s silver boom. They re-imagined and completely remodeled it—kitchen, full master suite, new baths, attractive entertaining areas, nice laundry, and storage.
“It’s proved timely,” says Armstrong. “Our extended family of siblings, nieces, nephews, and their children are fishing, hiking, and skiing up there, using this as a base camp.”
Armstrong says the mountain place is the couple’s Walden Pond—a place to rejuvenate from Denver’s hustle-bustle.
Channer, a certified financial planner, estate planner, and CPA—founder of Cornerstone Investment Advisors, LLC—says that reverse mortgages have grown from a vehicle primarily used by homeowners needing operating cash for their twilight years, into a way for younger couples (one borrower needs to be age-62-plus) to realize other dreams—getting a nicer primary home, creating a recreational property, or enhancing their retirement plan with a growing line of credit created within the reverse mortgage.
Armstrong, with Reverse Mortgage Funding (RMF), says the concept is working very well here in the Denver area. “Reverses are most effective for borrowers with good equity in their primary home, and the market here in Colorado has created lots of equity now.”
In January the FHA raised lending limits on homes valued to $822,375, while at the same time providing better protection for borrowers and their heirs.
Meanwhile, the Rocky Mountains provide lots of appealing venues for second homes, Armstrong adds. His own property, well removed from the high traffic resorts, is two-and-a-half hours from the house in Denver.
Armstrong and Channer say the potential opportunities that can be created from a traditional reverse on your current primary residence are significant in making a retirement income plan—such as creating a growing line of credit or other options.
Or you could even use RMF’s Reverse Mortgage for Purchase program to buy a new primary residence.
In either case, if you have lots of equity in that primary house, a reverse can be set up not just to avoid making mortgage payments but to pull dollars directly from the primary home’s equity for a second home project or other priorities.
Reverse borrowers never need to make another mortgage payment for as long as they live in the residence—unless they choose to. Borrowers continue to pay property taxes and insurance and must continue to keep the home up.
Hire a Certified Reverse Mortgage Professional
As a Certified Reverse Mortgage Professional (CRMP), Chris Handy has the experience and the knowledge to help you find the perfect reverse mortgage loan to increase your monthly retirement cash-flow and provide a funding source for home improvement projects. Chris has been in the mortgage business since 2001 and has focused on reverse mortgages since 2005. To learn more about the benefits of a reverse mortgage, get in touch with Chris Handy!