New Reverse Mortgage
Are you retired or planning to retire? Chances are you are looking for ways to maximize your retirement savings and income. Today, more and more financial advisors are recommending reverse mortgages as part of a balanced retirement plan. There are even different types of reverse mortgage products to fit your specific needs.
A Line of Credit
Use your proceeds now or access them in the future when you want or need them.
A Lump Sum Payout
Use your proceeds to improve cash flow by paying off an existing mortgage, or use them to pay off other expenses.
Supplement your retirement income by receiving a payment each month.
What Is A Reverse Mortgage?
Reverse mortgages were originally created in the 1980s to help Americans 62 and older convert part of the equity in their home into money that could be used during retirement. Recent changes to the program have made it a safer and smarter way for eligible homeowners to improve cash flow, maintain ownership of their home, and gain financial flexibility.
How it Works:
A reverse mortgage is a loan that is calculated based on a number of factors including the age of the youngest borrower, the appraised value of your home, and prevailing market interest rates. You are not required to make any monthly mortgage payments, but you are still responsible for property taxes, maintenance, and insurance, just as you would be with a traditional mortgage. As long as you meet those responsibilities, the balance of the loan plus interest is not due until the last remaining borrower leaves your home.
You might be familiar with reverse mortgages. But recent changes and new program guidelines make the new reverse mortgage worth reconsidering as part of your comprehensive retirement plan. So, what’s new?
Rates and fees are lower than you might expect.*
With the low fee and interest rate options offered by many lenders, today’s reverse mortgage may compare favorably with a traditional home equity line of credit or home equity loan alternative.**
* Rates vary by lender.
** Source: http://www.mybanktracker.com
It’s safer for you.
- New loan limits protect the remaining equity in your home.
- Mandatory mortgage insurance provides additional protection.
Your heirs are protected.
If your heirs want to keep the home, they may pay off the remaining loan balance, or 95% of the appraised value–whichever is lower. If they don’t want to keep the home, it’s listed for sale and the loan balance is paid off with the proceeds received. They never have to re-pay more than the value of the home. And once the loan is repaid, any remaining equity belongs to you or your heirs.
What Are The Advantages?
Using a reverse mortgage as part of your comprehensive retirement plan can help you make the most of your retirement. The New Reverse Mortgage can provide homeowners with these great advantages:
No more monthly mortgage payments.
There are no monthly mortgage payments required as long as you comply with your loan agreement and live in your home. You will, however, still be responsible for property taxes, insurance, and maintenance, just as you would with a traditional home loan.
Keep your home.
You will always retain complete ownership of your home.
Tax-free with no restrictions.
The proceeds received from a reverse mortgage are not taxed. However, while there are no restrictions on how loan proceeds may be used, access to some of your funds may be limited for the first 12 months of the loan. For tax issues, you should consult a qualified tax advisor.
Defer social security.
A reverse mortgage could help you delay receiving your Social Security benefits—the longer you wait to access Social Security, the more you will receive when you do.
How Are People Using Them?
Today, more homeowners and financial planners are using reverse mortgages in new and innovative ways as part of their long-term retirement strategy.
Here are some smart ways to use the New Reverse Mortgage to help meet your retirement goals:
- Pay off a traditional mortgage and improve your monthly cash flow.1
- Make retirement savings last longer.
- Preserve investment accounts during market downturns with a “standby” line of credit.2
- Supplement Social Security income with “tenure payments.”
- Use a line of credit to build a safety net for unplanned emergencies, home repairs, and health care expenses.
- Afford to retire earlier, or else wait until later (age 70) to maximize your lifetime Social Security benefits.3
- Buy a new home that better fits your needs.
1 A reverse mortgage is a home-secured debt that must be repaid upon maturity.
2 “Reverse Mortgages: What Advisors Should Know” by Paul Norr. www.bankinvestmentconsultant.com/blogs/reverse-mortgages-what-advisors-should-know
3 Social Security benefits estimator available at www.ssa.gov/estimator/.
Subject to Credit Approval
Click here to view: CFPB’s Guide to Reverse Mortgages (PDF).
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