Are you concerned about running out of money in retirement? You’re not alone. According to the 2017 Retirement Confidence Survey, 21% of retirees said they had less than $1,000 saved for retirement, and 38% said they had less than $50,000 saved. Also, most businesses no longer offer pensions, so retirees must rely on Social Security, which typically only replaces 40% of a person’s pre-retirement income. Even when retirees are successful in retirement savings, they still have concerns because of rising medical costs and increased life expectancy. Fortunately, it is possible to retire in today’s economy when you leverage home equity in your retirement plan. Historically, reverse mortgages had a negative connotation. However, but today’s reverse is being used to complement many retirement goals, such as long-term care planning, improving cash flow, and mitigating economic downturns.
Reverse Mortgage Defined
A reverse mortgage is a loan that converts your home equity into cash. The unique benefit is that you don’t need to pay it back month after month. Interest and fees are added to the loan balance over time. Your accumulated equity allows you to live your retirement comfortably in your home with your most significant asset working for you – your home.
The loan is payable at the time you leave the home and is a non-recourse loan, which means you or your estate cannot owe more than the value of the property.
To be eligible for a reverse mortgage, borrowers must be 60* years or older, live in the home as their primary residence, have sufficient home equity, and not be delinquent on any federal debt. Borrowers must also participate in a consumer information session held by an approved U.S. Department of Housing and Urban Development (HUD) counselor
New Safeguards In-Place for Your Protection
Today’s reverse mortgages include several built-in safeguards that protect borrowers. Here is a list of the key guidelines designed to help put your mind at ease.
- Reverse mortgages are non-recourse loans, which means that you or your heirs will not be responsible for more than what the home is worth. This remains true even if your home goes down in value.
- HECMs are insured by the Federal Housing Administration (FHA).
- FAR’s HomeSafe suite of reverse mortgages tools have built-in safeguards comparable to FHA-insured HECMs.
- All borrowers are required to attend independent education counseling to ensure they are fully aware of how their loan works.
- The financial assessment process helps determine if borrowers are willing and able to meet financial obligations, ensuring a reverse mortgage is a viable solution.
- LESA – Life Expectancy Set-Asides are reverse mortgage proceeds to pay taxes and insurance to make sure you meet loan obligations throughout the years and stay in your home.
- Tightened lending limits help borrowers preserve revenue streams for better, long-term money management.
- You continue to live in your home for the life of the loan, even if the qualified non-borrowing spouse is the last one to leave the home.
- All reverse mortgage loans are facilitated by a licensed loan officer who is verified by the state and will walk you through the process every step of the way.
HomeSafe Retirement Tools for Every Situation
Everyone has a unique retirement situation, so FAR created a suite of financial products called HomeSafe. Exclusively from FAR, HomeSafe reverse mortgage products include standard and jumbo loans to provide you with the financial footing to pursue a retirement path that is right for you. The following section provides details on the benefits of each of the HomeSafe products.
- HomeSafe Select
HomeSafe Select gives you the freedom and flexibility to access your funds as you wish by providing cash on hand through a line of credit with no monthly mortgage payments.
- HomeSafe Standard
The HomeSafe Standard is ideal for borrowers who want to increase their cash flow without paying a lot in fees.
Consult the Experts
If you are one of the tens of millions of baby boomers who don’t feel financially prepared, there may be a real solution for you. A reverse mortgage puts your hard-earned equity to work so you can maintain or elevate your lifestyle during retirement. Just like your 401K, IRA, or annuities, home equity is a powerful financial tool that can significantly enhance your retirement funding plan. Contact a Finance of America Reverse, LLC (FAR) representative today to learn more about reverse mortgage benefits and how they may help you secure long-term financial freedom.
*For certain HomeSafe® products only, excluding Texas and Utah where the minimum age is 62.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.