Reverse Mortgages

Introduction

The AARP says “Housing that is well designed, suitably located and affordable contributes to the ability of older persons to maintain their independence.  As such, housing is a crucial factor in determining the financial and emotional well-being of older persons.”

• 81% of seniors (62 and older) own their own homes
• 80% of persons age 65 and older own their own homes free and clear
• Reverse mortgages can tap into that enormous amount of equity to provide purchase power, lines of credit, and retirement income
• Most reverse mortgage literature and resources focus on refinance rather than purchase since the reverse mortgage purchase only became allowable after January 1, 2009.
• HECM – Stands for Home Equity Conversion Mortgage
• FHA insured reverse mortgages numbered 115,176 in 2008, up 6.4%
  

The Basics

• Available to persons 62 years of age or older
• Allowed in the form of a home purchase or refinance
• If refinancing, proceeds may be taken as income or line of credit
  Closing costs are financed in the loan amount
• The older the borrower, the more money is available
• The higher the home value, the more money is available
• The amount available is based on the youngest borrower
• The borrower must provide the money “down” to the loan amount on a purchase only
• The loan amount, over time, is increased by the interest accrued
• Interest and mortgage insurance are tax deductible - not deductible until property is sold and loan paid off
• The anticipated increase in value of the home is 4% per year

The Benefits

• No mortgage payments for life!
• No fixed maturity date
• Increased cash flow
• Independence – stay in your own home
• Simplicity – no income, credit or employment needed to quality
• Flexibility – access additional funds/income in years to come
• Permanent ownership – heirs can keep the property after payment