There are a few things that most Americans can agree on in life. One of them stands out; clear as day: Planning for retirement is hard.
While you may feel that you have a safety net with a company pension plan or Social Security, you simply cannot afford to stake your future by counting on it to cover you when the time comes.
Why, you might ask? Pensions and Social Security worked well for our parents didn’t they?
The truth is: many Americans today face challenges previous generations never had to. Costs seem to keep going up every year and what would have been a healthy retirement fund 10 years ago can seem slim and paltry now. People are having to come up with new ways to fund their retirements, whether that is working for longer or investing their assets wisely. Still, many older Americans are missing out on one of the biggest opportunities around to put money into their pockets. Home Equity Conversion Mortgages (HECM), also known as reverse mortgages, can provide the funds retired or soon to be retired people need to have a financially stable and happy retirement.
What is a Reverse Mortgage?
A reverse mortgage is more simple than its official acronym, Home Equity Conversion Mortgage (HECM), sounds. Basically a reverse mortgage sells some of the equity back on your home to a lender. Overtime, homeowners accrue equity by maintaining their monthly mortgage payments. The more payments you make the more your equity grows. Bank lends you money, you pay bank back. A reverse mortgage does exactly the opposite. You lend the bank part of your equity and the bank pays you a sum of money for it. You exchange some of your equity for immediate financial gain. The result is you pay off the remainder of your original mortgage and receive payments from the lending agency with no monthly bills. The loan is not required to be paid back until the homeowners have vacated the property or have deceased. Homeowners retain the title on the property unless the final payment becomes delinquent.
If it sounds fishy, it isn’t. The HECM loans offered by various agencies are all insured by the Federal Homeowners Association (FHA) and Department of Urban Development and Housing (HUD). Multiple agencies offer fantastic deals for people who are ready to retire or pay off the remainder of their mortgage. All Reverse Mortgage, Inc., a reverse mortgage firm, offers award-winning HUD approved direct lending services to people all across the country. Most online reverse mortgage firms offer helpful guides to provide customers with all the knowledge they need when choosing a reverse mortgage.
How Can a Reverse Mortgage Help Me?
Reverse mortgages are not for everybody, but for some people they can offer the flexibility and immediate financial support that they need. For example, People who qualify for reverse mortgages can use the money any way they see fit. That can come in handy for unexpected expenses such as medical bills or home repairs. Additionally, you can choose to receive your payments as one lump sum, you can have them payed out over a period of time, or establish a line of credit with them. One of the best aspects of a reverse mortgage is that there are no monthly mortgage payments associated with a reverse mortgage so long as you follow the rules applied to them! When you are considering a way to enhance your income just know that reverse mortgages are based off the appraised value of your house. So, the more valuable the house the more money you can receive. This can go a long way towards planning your retirement. You can also rest assured that after payment of the loan, any remaining equity belongs to you or your heir. This is a great option for people who aren’t planning on moving and can afford the cost of maintaining their home.
How Do I Qualify for a Reverse Mortgage?
The HECM was established in 1988 as a way for retired or semi-retired people to access the equity available in their homes as a way to help plan for retirement. To qualify, you must be 62 years of age or older and you need to have paid off a majority of your mortgage or own the property outright. Also make sure that you are using the property as your primary residence and be sure not be delinquent on any federal debt. After that, just keep regular payments of your property tax, homeowner’s insurance, as well as maintain and repair the property as needed.
If you meet all these criteria, then the final step is meeting with a HECM counselor approved by HUD. The counselor will be there to answer any questions, offer other modes of financial assistance, and provide the final step of approval for your reverse mortgage.
For the right person at the right time a reverse mortgage can be exactly what you need to secure your retirement. As long as you and your home qualifies, a reverse mortgage can help make your retirement as comfortable as possible.