MORTGAGE TALK
According to a 2010 Pew Research Center report, approximately 10,000 Americans turn 65 every day. As that’s the typical age for retirement, many seniors have to plan for their future without a work paycheck.
Beyond pensions, IRAs, and Social Security, reverse mortgages can help seniors manage their cash flow, especially if they don’t want to downsize from their current property.
“Most seniors want to remain independent and in their own home for as long as possible,” said Candy Watson, a reverse mortgage advisor for Retirement Funding Solutions. “A reverse mortgage enables seniors to tap into the equity of their property without having a monthly mortgage payment. However, they do have to continue to pay for HOA, taxes, and insurance and keep the property in good condition.”
Reverse mortgage eligibility criteria for seniors is dependent on many factors, as Watson illustrated.
“Everyone’s situation is different. If you’re 62, life expectancy is longer compared to 82, so it all depends on home values and what option they take, such as a fixed rate or adjustable loan,” Watson said. “You don’t have to own your home free and clear to qualify, but you do have to have enough equity to pay off closing costs or come in with the difference.”
Reasons for securing a reverse mortgage vary. A study released in 2016 by Ohio State University, in partnership with the nonprofit ClearPoint Credit Counseling Solutions, with funding from the MacArthur Foundation and the U.S. Department of Housing and Urban Development (HUD), surveyed a sample population who had been counseled for a reverse mortgage from 2006 to 2011
The study found that 41 percent of participants were interested in a reverse mortgage to gain extra income for everyday expenses, followed by 38 percent who stated a desire to pay off mortgage debt and 25 percent to pay off nonmortgage debt (such as credit cards, personal loans, and other debts). Additional reasons included the desire for home improvements or to provide financial help for family members and to pay for ongoing health or disability-related expenses or make a large scale purchase such as a boat or vacation.
Those study participants that did opt for a reverse mortgage expressed a 4.2 level of satisfaction with their decision (with 5 being very satisfied). Almost half said that the money lasted about the amount of time they anticipated, while 21 percent said it lasted it lasted shorter, and 11 percent said it lasted longer than expected.
Currently, the Home Equity Conversion Mortgage is the most popular reverse mortgage on the market. Insured by the Federal Housing Association, HECMs are considered the safest option for this type of loan.
Like a traditional mortgage, applicants are required to fill out an application, provide identification (including a Social Security card) and proof of income. Once the loan is approved, funding can take between 30 and 60 days, with 45 days as the average.
Watson suggested getting a referral for a loan company through a trusted real estate, mortgage or financial professional or shop around until you find a company you feel comfortable with, then bring along family members or financial consultants during the consultation process.
She said education is key for anyone who is interested in securing a reverse mortgage.
“There are quite a few companies that do reverse mortgages and are guided by the same regulations, but there is a difference in interest rates and closing costs,” Watson said. “If this was my mom or grandparents, I would want to know all the options. This can be a great choice for some people, but not everyone.”
For more information, call 661-877-1317 or visit http://rfslends.com/candy-watson-california-reverse-mortgage/.