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Is Now a Good Time for a Reverse Mortgage?

Is Now a Good Time for a Reverse Mortgage?

May 20th, 2020 | Reverse Mortgages

As the COVID-19 pandemic has roiled stock markets over the past few months, many Americans in or nearing retirement may be worried about their investment portfolios. Without the possibility to earn more money, more retirees, seeing a reduction in their nest eggs, are turning to reverse mortgages to supplement those savings. 

In fact, March saw a 25% increase in the number of scheduled reverse mortgage counseling sessions compared with a year earlier, according to the National Reverse Mortgage Lenders Association. As financial counseling classes are a prerequisite to obtaining reverse mortgages, that is a good indication that coronavirus concerns have pushed many more seniors towards that option.

So what is a reverse mortgage? Reverse mortgages have been around for 30 years with over a million loans having been made during that time. They are part of the government’s Home Equity Conversion Mortgage program and most are guaranteed by the Federal Housing Administration. They are home loans that allow borrows to pull most of the equity out of their homes for retirement needs. Unlike a standard home equity loan though, borrowers do not make monthly payments to repay the loan. Instead the loan is repaid when the borrowers die or sell the house.

Requirements

In order to qualify for a reverse mortgage, borrowers must be at least 62 years old and live in the home as their primary residence. They must also either own their home completely or not have much left to repay on a traditional mortgage. Borrowers cannot have federal debt in delinquency. And all borrowers are required to complete financial counseling sessions that thoroughly explain the implications of reverse mortgages.

Payout

When borrowers have been approved, they can receive their funds in several ways. It can be withdrawn as a lump sum, a fixed monthly stipend, or a line of credit to be drawn down as desired. The amount of money borrowers can receive depends on how much equity they have, how old they are at the time of the loan and the current market interest rates.

Repayment

A reverse mortgage must be repaid in full when the borrower moves or dies. In most cases, this requires the home be sold to pay off the debt. Borrowers should realize that a reverse mortgage could make it very difficult to pass their home down as an inheritance to family members.

Borrowers should also understand that they will still be responsible for paying their property taxes and homeowners insurance premiums as well as any other costs to maintain the home. Reverse mortgages also come with loan fees. Sometimes these can be rolled into the loan balance but they may reduce the amount of funds available.

While reverse mortgages are not the right fit for everyone, during this time of ultra-low interest rates and a volatile stock market, they may be the perfect way for many seniors to finish their lives in the comfort of their own homes.

If you have questions about Reverse Mortgages, give us a call today at 847-257-7278.

These materials are not from HUD or FHA and were not approved by HUD or a government agency.

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Prime 1 Bancorp, Ltd is not affiliated with any government organization or bank nor do we act on behalf of the FHA or VA. This material is not from HUD or FHA and has not been approved by HUD or a government agency. We are not a Federally chartered or State Chartered Bank. We are an we are an Illinois Residential Mortgage Licensee by the Office of Banks and Real Estate Lic #MB.6761138, a California CFL Licensed Mortgage Brokerage by Department of Business Oversights Lic #60DB055973, a Colorado Registered Mortgage Brokerage by Division of Real Estate, a Florida Residential Mortgage Brokerage Licensed by the Office of Financial Regulation Lic #MBR1930 dba Prime 1 Mortgage Inc, a Kentucky Mortgage Loan Broker Licensed by the Office of Financial Institutions Lic #MB729362, a Tennessee Licensed Mortgage Broker by the Department of Financial Institutions Lic #218020, a Texas SML Licensed Mortgage Brokerage by the Texas Department of Savings and Mortgage Lending, and a Wisconsin Licensed Mortgage broker by the Department of Financial Institutions Lic #1434638BR Prime 1 Bancorp, LTD Corporate Office is located at 2720 S. River Rd Suite 50, Des Plaines, IL 60018 our Toll Free Number is 888-205-3737. NMLS: 1434638

Loan product availability is subject to qualification of the borrower and loan approval after full review of the file. Not every applicant qualifies or is eligible for every loan program. Some loan products may not be available in all states. Loan approval, note rate and annual percentage rate are dependent on factors including, but not limited to, credit, collateral, income, assets and overall financial history. Not all applicants will be approved for a loan. All loan programs, terms and annual interest rates are subject to change without notice. NMLS: 1434638

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THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIALMORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.