For many seniors one of their greatest sources of security is their home. It not only provides a comfortable and familiar environment, but it provides a sense of independence and a source of many fond memories. The equity in that home represents a financial nest egg and a legacy for them to pass on to their family. With the ever-increasing cost of maintaining a home, along with the overall rise in the cost of healthcare, finding the resources to live out ones life at home is becoming a growing challenge.
What is a Reverse Mortgage? A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is a government insured loan program that allows senior homeowners, age 62 and older, to convert the equity in their home into usable cash. Unlike a conventional mortgage however, qualification is not based on credit, employment, income, or assets, and there are no monthly payments. The homeowner never forfeits title, and as long as they pay the property taxes and homeowners insurance, no repayment is required until the senior no longer occupies the home due to their sale of the property or their passing.
Are Reverse Mortgages Safe? Absolutely! Reverse Mortgages are FHA insured or backed by Fannie Mae. And as long as you continue to live in the house as your primary residence, keep the real-estate taxes and insurance(s) current, and comply with the terms of the loan, you do not have to repay the loan.
For an increasing number of seniors, age 62 or older, a reverse mortgage has provided great peace of mind. They are provided the tax-free cash to meet these financial demands without giving up title to their home. They have no monthly payment or deadline as to when they must move or pay off the loan. Although the program is viewed by seniors as a possible solution to there financial needs, they are concerned about putting themselves, their home or their family at risk. Following are a few of the safeguards that HUD and Fannie Mae have provided:
1.Loan amounts, interest rates, and loan terms are set by HUD and Fannie Mae and can never vary from one lender to another.
2.HUD and Fannie Mae have established what fees can be charged and has set caps on them all.
3.All programs have lifetime interest rate caps.
4.The term of the loan is 150 years beyond the birth date of the youngest homeowner (i.e. date of birth April 1940, loan expiration April 2090).
5.If a spouse passes, none of the terms of the loan change, and the remaining spouse may stay in the home for as long as they wish.
6.If you are receiving monthly draws from your reverse mortgage, and your check is late for any reason, the lender is required by federal statute to pay the homeowner a 10% late fee.
7.Funds from a reverse mortgage are not considered income and therefore are not taxable and have no affect on ones Social Security or Medicare.
8.If a homeowner’s health required extended hospitalization or assisted living care outside the home, as long as the homeowner returns to their home within 12 months there is no interruption in the loan.
9.Lenders are not permitted to take any steps in processing a reverse mortgage for any homeowner until the senior has received independent counseling from a certified reverse mortgage counselor.
10.Following the closing of the reverse mortgage the homeowner has a three-day period to reconsider the loan and cancel the transaction without any cost or obligation.
Reverse mortgages provide a safe secure solution for seniors to live out their life in the comfort of their own home with the dignity they deserve.