When’s the last time you checked in with your clients about their retirement income needs?
Recent studies show today’s seniors face rising costs for medication & in-home care as well as increased pressure from family members for financial help.
Instead of tapping into retirement funds to get cash, a reverse mortgage could be just the tool they need.
Who Is Eligible and Can Benefit from a Reverse Mortgage?
As we’ve mentioned before, seniors have a significant amount of wealth tied up in their home values. But who is eligible to access this home equity to improve their quality of life?
To be eligible for a reverse mortgage:
- The youngest homeowner on the title must be at least 62 years old.
- The home must be the borrower’s primary residence.
- The borrower must pass a financial assessment to ensure ability to pay for property taxes, homeowner’s insurance, and home maintenance.
Did you know that the home doesn’t have to be mortgage-free? The proceeds of the reverse mortgage will take care of the current mortgage balance once it is established.
Debunking Common Reverse Mortgage Misconceptions
There tend to be some common misconceptions regarding reverse mortgages, and we’re here to set the record straight.
Here are a few of the most common misconceptions debunked:
Myth #1. The bank now owns the home.
False: Just like a traditional mortgage loan, the homeowners are on title to the home and the mortgage is secured by a lien on the property. The bank does not own the home.
Myth #2. The heirs are responsible for paying back the loan.
False: Once the homeowners no longer live in the home, the property can be sold to repay the loan. It’s important to note that the home is the only collateral the lender can access to repay the loan, so other assets are off limits.
Myth #3. There can be no current mortgages on the property to qualify for a reverse mortgage.
False: As long as there is enough equity in the home to pay off the balance of your current mortgage, the homeowners can qualify.
How Does a Reverse Mortgage Work To Provide Retirement Income?
There are many ways to structure a reverse mortgage and we work to customize each loan option to you or your client’s financial needs. Here is an overview of options:
Purchasing: This option gives you the opportunity to down size or right size your home.
Line of credit: With this option, you’ll be able to access your funds from a line of credit anytime you need them, and you will only pay interest on the amount you borrow.
Monthly term payments: If you choose monthly term payments, you will receive monthly payments for the length of time of the term you select.
Monthly tenure payments: You will receive monthly payments that last the entire length of the loan.
Combo payment option: You can further customize a reverse mortgage by combining the different payment options listed above. For example, you may choose to receive a lump sum combined with monthly payments or a lump sum combined with a line of credit.
A portion of a lump sum: You can receive a portion of the funds from the proceeds of the loan up front to use at your discretion.
The flexibility of a reverse mortgage makes it a very attractive option for meeting financial goals.
How Can Income from a Reverse Mortgage Be Used?
Do you have senior clients struggling to make ends meet every month? Here are some ideas on how they can get ahead with their expenses using a reverse mortgage:
- Use it for healthcare needs like in home care, doctors’ visits, and medication.
- Customize their home for special needs as they age by adding ramps, a first-floor bathroom, or a walk-in shower.
- Gift it to children or grandchildren who can use it to pay for college or their own down payment on a home.
- Supplement their current retirement income to allow other assets time to appreciate.
- Create more room in the monthly budget by eliminating their current mortgage payment.
And, here’s another great benefit: The proceeds from a reverse mortgage are tax-free and not considered as income, so they do not affect Social Security or Medicare benefits.
Let Us Help You Help Your Clients
A reverse mortgage must be the right fit for you or your client. Contact us today with any questions you have and to see how we can help!