For those in retirement—or those approaching it—financial concerns may be at the forefront of
your mind. Life expectancy has increased, as has the price of food, energy, and healthcare.
Meanwhile, pension plans are disappearing, and social security is in danger.
It’s no wonder that senior citizens are wondering: How can I afford to cover my monthly
expenses after my spouse dies? How will I pay for prescriptions or hospital stays on my fixed
income? How can I live in my home as long as possible?
Thankfully, financial distress doesn’t have to define your retirement. Finance of America
Reverse LLC (FAR) offers answers to retirement questions like these and can guide you to
solutions that can offer hope and security instead of distress and fear. One such solution might
be a reverse mortgage.
How reverse mortgages work
A reverse mortgage supplements retirement income and social security by allowing seniors
ages 62 and over to convert some of their home equity into a line of credit or cash (available in
one lump sum or monthly payments). The amount of money available is dependent on the value
of your home and life expectancy.
With a reverse mortgage, repayment isn’t necessary until the home is sold, the last surviving borrower no longer lives in the home, or default on loan terms* In addition to maintaining the home, homeowners need to have hazard insurance and stay current with property taxes.
How reverse mortgages can help
Unexpected bills, health issues, and the need for long-term care all have the potential to be
financially devastating. With a reverse mortgage, seniors can pay bills quickly, avoiding
unnecessary late fees, and set aside money to cover future medical expenses or long-term
Even if you have no assets other than your home, a reverse mortgage can put cash in your
pocket. Reverse mortgages allow retirees to meet their financial needs and goals, including but
not limited to:
● Pay off medical debt
● Stay in their homes
● Take vacations
● Live an active and healthy lifestyle
● Increase savings funds for peace of mind
● Save for long-term care
● Renovate their home
● Put cash in their pocket
● Maintain an independent lifestyle
Randy and Vickie are a retired couple, aged 72 and 68. They want to stay in their current home
but need to increase their monthly income to cover expenses. They meet with a FAR reverse
mortgage advisor to discuss their financial needs and future goals.
The couple’s home is valued at $300,000, and they currently owe $35,000 on their mortgage.
Here is an example of how Randy and Vickie might spend their reverse mortgage income.
Current home value $300,000
Available Loan Amount $168,600
Total net settlement costs $8,037**
Available loan proceeds $160,563
Less current mortgage $35,000
Net proceeds $125,563
Family vacation $6,000
Home renovations $20,000
Balance for unexpected expenses $99,563
From financial burden to financial freedom
Financial burdens can be transformed into financial freedom. Anyone considering a reverse
mortgage should schedule an appointment with a mortgage specialist to ask questions and
make sure you understand the product and the process. Be aware that if you choose to move
forward with a reverse mortgage, a secondary financial counseling session with an independent
third party is required to ensure that it’s the right financial decision for you.
While there is no need to rush into decisions, timeliness is of the essence. The younger and
healthier you are, the longer you will be able to enjoy the life of financial freedom that a reverse
mortgage can bring.
Life situations can improve if strategic steps are taken. With the help of a reverse mortgage,
Randy and Vickie have been able to take their dream family vacation, renovate their home, and
rest easy knowing that they have savings to cover unexpected expenses.
You can experience the same financial freedom. FAR’s specialists can walk with you through
every step of the process—from initial inquiry to closing—to ensure you receive the best loan for
your financial needs and goals.
Could a reverse mortgage help solve your financial worries? Learn more about how you can
ease retirement worries or contact us today to set up a complimentary consultation.
*If the borrower does not meet loan obligations such as taxes and insurance, then the loan will need to be repaid.
** Illustration is for educational purposes only and assumes a borrower(s) age 68 who resides in Chicago, IL. Rate quote generated on 1/25/17. Rates and assumptions are subject to change. The Home Equity Conversion Mortgage APR is variable and is based upon loan term, home appreciation, an index plus a margin. The APR of an adjustable reverse mortgage will vary with either the 1 month or 12 month LIBOR (the index) as published in the Wall Street Journal depending on which loan program is selected. As of December 31, 2016, the Total Annual Loan Cost Rate for the above described hypothetical Home Equity Conversion Mortgage with a term between 2 and 22 years with home appreciation between 0 and 8% ranged from 4.871% APR to 8.778% APR. Higher rates may apply due to an increase in the Index. Borrowers are responsible for paying property taxes and homeowner’s insurance. We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes or insurance payments, or does not otherwise comply with the loan terms. Choosing a negatively amortizing loan may cause your balance to increase, possibly substantially. Loans are subject to program guideline, credit, income, and property approval. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Finance of America Reverse and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation. Other restrictions may apply. Not all funds may be available at closing. The Consumer Handbook On Adjustable-Rate Mortgages (CHARM Booklet) lists terms and conditions that apply adjustable mortgages and can be obtained at http://files.consumerfinance.gov/f/201401_cfpb_booklet_charm.pdf
These materials are not from HUD or FHA and were not approved by HUD or any government agency.
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.