Aug 29, 2023 | Real Estate
A reverse mortgage and a home equity conversion mortgage (HECM) are both types of loan products that allow homeowners to tap into the equity they have built up in their homes. However, there are some important differences between the two.
A reverse mortgage is a type of loan available to homeowners who are 62 years of age or older. With a reverse mortgage, the lender makes payments to the borrower, which can be taken as a lump sum, line of credit, or regular payments. The loan is paid back when the borrower dies, sells the home, or permanently moves out of the property.
On the other hand, a home equity conversion mortgage (HECM) is a specific type of reverse mortgage that is insured by the Federal Housing Administration (FHA). To qualify for an HECM, the homeowner must be 62 years of age or older and own their home outright or have a low mortgage balance that can be paid off with the proceeds from the HECM.
One of the key differences between a reverse mortgage and an HECM is the way the loan is structured. With a reverse mortgage, the lender makes payments to the borrower, while with an HECM, the borrower can receive payments from the lender or choose to receive a line of credit that they can draw on as needed.
Another important difference is the cost. HECMs are insured by the FHA, which means that they come with certain fees, including an initial mortgage insurance premium, an annual mortgage insurance premium, and other closing costs. Reverse mortgages, on the other hand, may come with different fees depending on the lender.
Overall, while both a reverse mortgage and an HECM can provide homeowners with a way to access the equity in their homes, there are important differences to consider when deciding which option is right for you. It’s important to do your research and speak with a qualified financial professional to understand the pros and cons of each option and make an informed decision.
Mar 29, 2023 | Real Estate
If you are getting ready to retire, you need to make sure you have income to support yourself during your golden years. One popular option is a reverse mortgage, and you can use it to supplement the benefits you receive through Social Security. On the other hand, you may have also heard about a home equity conversion mortgage. What are the differences between them, and which one is right for you?
A Reverse Mortgage
A reverse mortgage is a popular option because you can tap into the equity you have in your home to receive funds from a specific lender. In some cases, they will provide you with a single lump sum, but in other cases, they may provide you with monthly installments. You are not required to make any monthly mortgage payments, and you simply have to pay the money back when you sell your home. Your name will remain on the title of your home even as you tap into the equity to support your retirement. There are multiple types of reverse mortgages, and a home equity conversion mortgage is one popular option.
A Home Equity Conversion Mortgage
A home equity conversion mortgage is one specific type of reverse mortgage that is insured by the Federal Housing Administration. It provides you and your heirs with certain protection, and it is only available to borrowers who are 62 years of age or older. If you take out this type of reverse mortgage, you must use the funds to pay off any remaining balance you have on the original mortgage. Then, any funds that are left over will be provided to the homeowner. There are a number of factors that will dictate the amount of money you can receive. They include the age of the youngest borrower, the expected interest rate, and the national lending limit insured by the FHA.
Is This Option Right For You?
If you own your home outright, a reverse mortgage could be a great way for you to support yourself during retirement while also protecting any inheritance you passed down to your heirs. Consider reaching out to a professional who can help you decide if this is the right option to meet your needs.
Mar 11, 2020 | Mortgage
There are many individuals who end up on a fixed income once they reach a certain age; however, their expenses aren’t always fixed. Sometimes, there is a large medical expense. In other cases, someone might need money for a new car or a home repair. In the event that someone needs cash quickly, one option is called a reverse mortgage.
Those who have equity built up in their home can draw upon this to help with unexpected expenses. This is a quick source of cash that many people overlook. At the same time, it is important to think about the pros and cons of a reverse mortgage.
The Pros Of A Reverse Mortgage
Taking out a reverse mortgage does have several benefits that everyone should know. First, there are no required monthly payments for any reverse mortgage loan. In addition, the money that people get from a reverse mortgage is not taxable. For many, this acts as a tax shield against any income that results from a reverse mortgage.
Next, nobody can ever owe more money than the value of the home when the building is sold. This prevents people from getting buried by potential interest payments. Finally, nobody will ever have to leave their home with a reverse mortgage. The owners retain the rights to the property.
The Cons Of A Reverse Mortgage
On the other hand, there are a few cons that people need to keep in mind as well. First, reverse mortgages are regulated by the federal government, which means that everyone needs to read the rules and regulations carefully. In addition, not everyone who owns a home will qualify for a reverse mortgage. They need to have enough equity built up in the home before the lender will consider it.
In order for someone to take out a reverse mortgage, a lien is going to be placed against the property. In the eyes of some, a lien must be paid off in the event the property is to be sold. Finally, in order to prevent a reverse mortgage from resulting in foreclosure, the building needs to be both maintained and insured.
Thinking about the pros and cons carefully can help someone decide if a reverse mortgage is right for them.
If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.
Jan 8, 2020 | Mortgage
One of the most common worries that people have is money. When it comes to those golden retirement years, many people worry about running out of money. At the same time, most people who reach their retirement years have a lot of equity in their home.
Therefore, many people think about drawing on the equity in their home as a source of income. A reverse mortgage will allow someone to do exactly that. On the other hand, can receiving payments from a reverse mortgage impact the benefits that someone can receive from Social Security or Medicare?
The Basics Of A Reverse Mortgage
First, people need to think about what a reverse mortgage truly means. When someone takes out a mortgage loan to purchase a home, they make regular monthly payments to the lender to repay this loan. A reverse mortgage is exactly that: a mortgage in reverse.
Instead, the bank pays the borrower. People withdraw money from the bank against the equity of the home. Then, this money doesn’t have to be repaid until someone sells the home, moves out of the house, or dies. Some of the fees that people may need to pay that are associated with a reverse mortgage include closing costs, origination fees, and insurance premiums.
Impact On Social Security And Medicare
First, people can rest easy. In general, a reverse mortgage is not going to have any impacts on someone’s Social Security benefits. The amount of income someone brings in from a reverse mortgage will not impact someone’s monthly benefits.
In addition, a reverse mortgage is not going to impact the benefits that someone receives from Medicare. On the other hand, it might impact someone’s Medicaid and SSI benefits (supplemental security income). Those who need clarification regarding this should speak with a trained and experienced attorney.
Is A Reverse Mortgage The Right Move?
Some people might be thinking about whether or not a reverse mortgage is right for them. It is important for everyone to think about their own individual financial situation because what is right for one person might not be right for the next. A reverse mortgage has the potential to provide someone with added financial security.
If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.
Jul 25, 2014 | Home Mortgage Tips
If you are nearing retirement, a reverse mortgage might be right for you. This type of mortgage essentially allows you to turn your home equity into cash. If you find yourself with little money, a reverse mortgage could be the perfect solution, and here’s why.
No Worries About Monthly Payments
After taking on a mortgage, there are many costs that you have to worry about. One of these problems is mortgage insurance premiums. Add interest and fees from lender service providers to the mix, and you’ve got yourself many costs.
All of these fees can create tremendous headaches, as a large chunk of the loan amount goes into covering these costs.
When you undertake a reverse mortgage, you don’t have to worry about any of that. The loan is paid back with home equity, not ongoing cash flow, so monthly payments aren’t a worry.
Your Income Won’t Affect Your Eligibility, And The Income You’ll Get Won’t Create Problems
If the reason you’re hoping to get a reverse mortgage is your low income, the last thing you want is that income to be the deciding factor. With this type of loan, it’s not an issue. That’s because the thing that determines eligibility is your house’s value.
In fact, the income you’ll be getting from this loan is not taxable, which means you’ll be able to keep it in full. Plus, any benefits you get from Medicare will not be affected, and neither will your Social Security.
As such, what you’ll be getting is a loan that doesn’t take into account your current income. Rather, it adds on to it, without creating any issues for you. Plus, you’ll be able to get the money in several different ways, which means you’re in control.
Lastly, the money you get is fully yours. That means that you can use it for anything you want, whether that means you’ll be paying off other loans, or simply funding your day-to-day needs.
You Won’t Be Taken Away From Your Home
Your house is yours because it feels that way. It’s the place in which you’ve invested money and effort. It’s also the place where many loved memories were created, and where they’ll keep on being created.
One of the hardest things for the elderly is being removed from their loved homes and placed into care. They have to leave the place they’ve grown to love. Worse than that, they’re thrown into a world they don’t know.
With a reverse mortgage, this doesn’t need to happen. With this type of loan, you get additional income, and you get to stay in your own house.
Not only that, but you’re also keeping the title to that place until you move, pass away, or reach the end of the loan’s term. Your home will stay yours, both effectively and in the documents.
There are many more reasons why a reverse mortgage is a great idea. However, the fact that you’re in complete control of the income you’ll be getting is one of the most important things.
If you’d like to learn more about reverse mortgages, be sure to contact your mortgage professional.
