Reverse Mortgages: Retiring with Financial Freedom

reduced rights and benefits, while a larger percentage of equity is available to borrowers of increased age. The borrower must not owe any federal debt and must complete an in-person or online educational session with a HUD-approved counselor to make sure they are fully aware of their options and responsibilities with a reverse mortgage. Applicants must also be prepared and able to maintain their home and continue paying their property taxes & homeowners insurance, even though they’ll no longer have a mortgage payment. Reverse mortgages have much less strict underwriting guidelines and require fewer documents from the applicant than traditional mortgages so they are easier to obtain. 

If your current home no longer suits your needs and you want to downsize, it’s even possible to purchase a new home with a reverse mortgage. Let’s theorize that you just sold your home and netted $325,000 in proceeds, and this is what you will have in savings for the remainder of your life. You now have essentially 5 choices: rent and most likely pay more each month than your mortgage was, live with friends or family, move into a retirement community, purchase with the cash you now have, or purchase a new home with a reverse mortgage. You want to maintain your freedom and live in your own home, so you opt to buy. With guidance from a trusted real estate agent, you’ve found the right home for your retirement years, and it’s listed for $300,000. You could pay cash out of the $325,000 you have from the sale of your home, but that won’t leave you with much for living expenses and emergencies. After calculating the Principal Limit (loan amount) and deducting the IMIP (Initial Mortgage Insurance Premium) as well as @$150,000 for the down payment and closing costs, you could retain around $175,000 to fund your retirement by using a reverse mortgage to buy your new home rather than the $20,000-$25,000 you would have had left after simply buying it outright with cash. 

A reverse mortgage allows a homeowner to leverage part of their equity into loan proceeds based on their age, interest rate, and appraised value. The interest and monthly mortgage insurance are deferred until the homeowner permanently vacates the property. A reverse mortgage is a non-recourse loan, which means the lien is secured only by the home itself. When the home is sold, the heirs keep any profit while the FHA covers any loss so there is no financial burden on the borrower’s family. These loans are also structured to ensure that seniors have the continuing funds they 

Reverse mortgages provide an incredible opportunity for seniors to take control of their retirement, while allowing them to age in place in their own homes. Through a lump sum, line of credit, monthly stipend, or a combination thereof, homeowners can utilize the equity in their homes to secure their financial future, plan for unexpected medical bills, free up room in their budget, or even enjoy hobbies and travel. Let’s explore what reverse mortgages are, who qualifies, the benefits, address the possible objections and dispel the myths about the program.

No matter how much equity you have in your home, a reverse mortgage could provide the financial solution you need. Borrowers who own their homes free and clear or have substantial equity can convert that equity to a line of credit they can access whenever they need it and/or establish continuing monthly allotments to bolster their retirement income. An additional, often overlooked benefit of reverse mortgages is that the 

~ Chad Moore, NMLS #165458  
The Mortgage Market of Delaware 
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unused portion of the line of credit will grow over time, regardless of how the borrower’s home appreciates. Homeowners with limited equity can pay off their current mortgage and eliminate that large monthly payment from their budget.

need and are less likely to see their loan amount exceed their property value, even during periods of turmoil in the housing market. Additionally, the funds homeowners receive through a reverse mortgage aren’t considered income, so the money isn’t taxable and won’t interfere with Social Security income restrictions. 

The Mortgage Market of Delaware, LLC

Despite the outdated belief that reverse mortgages are somehow designed to rob older homeowners of their houses, these loans were created to help seniors age in place, in the best environment for them, and to maintain their financial independence. If a reverse mortgage sounds like the right choice for you and you’d like to learn more, contact a Loan Originator who will review your unique financial situation and calculate the options to best fit your personal retirement needs. If your family has questions or concerns, invite them to participate as well. The goal is to set you up for financial success and to provide the personalized guidance that you need to achieve that success. 

To qualify for a reverse mortgage, one must own their home even if they have a mortgage on it, and it must be their primary residence. The reverse mortgage can be used to pay off the current mortgage and any other mandatory obligations, such as tax liens, judgements, and closing costs. Eligible property types include single family residences, 2-to-4-unit buildings, HUD-approved condos, homes in a Planned Unit Development, and Manufactured homes that meet FHA requirements. At least one homeowner must be 62 years old. If a co-borrower is under the age of 62, the loan will have 

As you approach your retirement, determine if a reverse mortgage is right for you by asking yourself a few questions. What is your planned monthly budget and how much money will you need each month? What is your current mortgage balance and what is the market value of your home? Do you plan to live in your house for a few years, or for the foreseeable future? Is your priority leaving your heirs an inheritance, or ensuring your financial stability during your later years?