Why Consider a Reverse Mortgage
Your retirement funds may come from savings, investment income, and Social Security. But now, there’s another source that may help you complete the longevity planning puzzle.
Reverse Mortgages are becoming increasingly recognized by homeowners and financial advisors as a smart and safe way to access an important retirement asset: home equity
Most reverse mortgages are government-insured Home Equity Conversion Mortgages (HECMs). You will often hear the terms used interchangeably. Available exclusively to people age 62 and older, a reverse mortgage helps you live more comfortably and more financially prepared for the future.
You can use a reverse mortgage to:
- Avoid selling investments at a loss in a “down” market.
- Establish a “stand-by” line of credit that you can tap as needed. Unlike a traditional Home Equity Line of Credit (HELOC), a reverse mortgage line of credit cannot be reduced or revoked, if the loan terms are met. And the unused line of credit grows over time.
- Supplement retirement income with tax-free* funds.
- Delay collecting Social Security, for a larger monthly benefit.
- Pay for medical or long-term care costs.
- Finance the purchase of a more suitable home, with no monthly mortgage payments**
Among the benefits of a reverse mortgage:
- Use your home equity to help you maintain a comfortable standard of living in your own home.
- Tax-Free* loan proceeds you can use however you choose.
- Great Flexibility! Choose to take your proceeds as a line of credit; monthly advances for a set period of time; a monthly stream of funds for as long as you live in your home; a lump sum; or a combination of these options.
- No monthly mortgage payments! If you qualify and have an existing mortgage, home equity loan, or any other type of debt, you can pay it off and reduce your monthly expenses. + Or, if you own your home free and clear, you can get the additional funds you need with no minimum monthly repayments required. (As the homeowner, you remain responsible for paying property taxes, homeowner’s insurance, and homeowner’s association dues, if applicable.)
What are the costs associated with a reverse mortgage?
In addition to interest, the costs can include a property appraisal fee, origination fee, closing costs, mortgage insurance premium, servicing fee, and a modest charge for independent counseling. While closing costs vary based on the type and size of the loan, they are similar to those for any traditional mortgage. Minimize the out-of-pocket expenses by rolling most of the up-front costs into the loan.
And you can reduce your costs by taking a lower amount of proceeds that are available to you. We will give you a detailed cost breakdown and explain the different interest and pricing options that you can choose from.
How and when does a reverse mortgage need to be repaid?
If the terms of the loan are met, a reverse mortgage does not have to be repaid until the home is sold or is no longer the primary residence of at least one borrower (or a non-borrowing spouse who meets certain requirements).
Usually, the last surviving borrower or their estate sells the home to repay the loan. It can also be repaid in cash from any source, such as other assets, proceeds from a life insurance policy or a loan refinance. Once repaid, any remaining equity belongs to you or your estate and can be transferred to heirs. In any case, no debt is passed along to your heirs.
How much money can I get?
This depends on several factors, including the age of the youngest borrower or non-borrowing spouse, your home’s value, the amount of equity, FHA (Federal Housing Administration) lending limits, the current interest rate, and the reverse mortgage product and payment option you choose. If you have an existing mortgage, your reverse mortgage will first be used to pay that off. A Prost Mortgage loan office can provide you with a quote that is tailored to your specific situation, with no costs or obligation.
To be eligible for a reverse mortgage you must:
- Be at least 62 years old.
- Live in the home as your primary residence.
- Have sufficient home equity.
- Not be delinquent on any federal debt.
- Participate in a consumer information session held by an independent counselor who is approved by the U.S. Department of Housing and Urban Development (HUD)
As a Mortgage Lender in Northern Kentucky, the team at Prost Mortgage Group, are experts in Reverse Mortgages. We walk you through the process and answer your questions. Thus, ensuring you are well informed and able to make the decision that is best for you.
Prost Mortgage Group is located in Northern Kentucky but provides Mortgage Lending services in Kentucky, Ohio, Indiana, Michigan, Tennessee, and Florida. If you have questions regarding any mortgage loan products, feel free to give us a call at 859-795-1316
*Not tax advice. Consult a tax professional. **If the borrower does not meet loan obligations, such as keeping current with property taxes and required insurance, then the loan will need to be repaid. +Your reverse mortgage proceeds will first be used to pay off any existing mortgage balance(s) and/or federal debt.
Success Mortgage Partners, Inc. supports Equal Housing Opportunity. NMLS ID# 130562. This is informational only and is not an offer of credit or commitment to lend. Interest rates, products, and loan terms are subject to change without notice and may not be available at the time of loan application or loan lock-in. Contact Success Mortgage Partners, Inc. to learn more about your eligibility for its mortgage products. Loans are subject to buyer and property qualification. Cash reserves may be required. Success Mortgage Partners, Inc. is not acting on behalf of or at the direction of HUD/FHA or the Federal Government.