While inflation rates are projected to stay below 1 this quarter, Trading Economics expects inflation to stand at 2.00 in 12 months, and 2.80 by the year 2020. There is no doubt that prices will continue to rise over the next year and beyond. For our nation’s seniors this can mean big trouble, especially for those that are on a fixed income or rely on their savings to get through? So what is a senior to do? One could always re-enter the workforce, but what about those that are disabled, sick, or otherwise unable to work? The reverse mortgage may be the solution.
Real estate experts estimate there is trillions of dollars in untapped home equity in the United States. That means that millions of homeowners are not utilizing their greatest asset, and they are leaving money on the table. For some seniors, the choice to eat or pay their property expenses is a very real, very scary dilemma. That means that taking out a home equity loan or a first or second mortgage is not an option. For someone that is already forced to decide between one basic necessity and another, adding a mortgage payment is simply not feasible.
A reverse mortgage is a loan available to homeowners 62 years of age and older. It is a FHA insured program designed to help seniors take advantage of the equity in their home without adding a monthly mortgage payment. The money received from the reverse mortgage is tax-free and does not affect social security, Medicare, etc. A homeowner can get the money in a variety of ways, including a lump sum payment, monthly payments, or even a line of credit. The line of credit even has a growth feature on it in which the longer the money stays in the line of credit, the larger that line grows over time.
For the homeowner, they are only responsible for paying their property taxes and homeowner’s insurance. If they do that, and keep the home in good condition, then the senior can live in their home for the rest of their lives without ever making a monthly mortgage payment. More and more however; seniors are choosing to continue to make their mortgage payments so they can pay off the loan, just they would with every other mortgage they have ever had. There is peace of mind and security in knowing that should something happen, the elder homeowner does not have to make a mortgage payment and it will not affect their credit or accrue late fees like a traditional 30 year mortgage would. Furthermore; the senior retains ownership of their home and retains the title to it. This gives the homeowner the right to make improvements or additions to the home or sell it if they choose.
The amount of money you can receive is based on three factors:
First, you need to contact a reputable lender. Then, you must undergo a counseling session with a FHA certified counselor. This counselor does not work for the bank, and gains nothing from the transaction. They are paid whether you proceed with the loan or not. This counseling session is designed to protect the borrower from predatory lending by ensuring all of the details of the loan have been fully disclosed. Then, you file an application with the lender, followed by the home appraisal. Once the counseling, application, and appraisal are complete the lender will walk you through the closing process.