Reverse Mortgages: Another Tool for Seniors
For our April Chalk Talk, I invited my friend and Reverse Mortgage Specialist, Homa Rassouli from Mutual of Omaha. She has over 38 years of financial services and mortgage industry experience with the last 16 exclusively in the reverse mortgage business so I knew she would educate us all a little bit more about reverse mortgages.
The responsible use of home equity may be an option to help mitigate certain market risks and help seniors to stay financially secure during future market disruption. It’s important to note that these are not appropriate for everyone but a reverse mortgage can be another financial tool for seniors who understand the terms of the loan and can make an informed decision if a reverse mortgage is right for them.
The number of reverse mortgages has gone up because property values have gone up. After the pandemic, a lot of people lost their job or wanted to retire easier and faster so they used their home equity. Plus in January 2023 the FHA limit was raised allowing home owners to borrow up to nearly $1.1 million.
If you heard about reverse mortgages before, there are still a lot of misconceptions about reverse mortgages. Previously people started losing their houses when their equity was gone and still to this day a lot of people think that if they do a reverse mortgage, when there is no equity left they will lose their house. In 1987 Housing and Community Development Act structured reverse mortgages through the Home Equity Conversion Mortgage program which are insured by the FHA. Since 1988, these Home Equity Conversion Mortgages (HECM) and Jumbo Reverse Mortgages are insured by the government.
The Borrower Requirements according to the hud.gov website indicate you must:
- Be 62 years of age or older
- Own the property outright or paid-down a considerable amount
- Occupy the property as your principal residence
- Not be delinquent on any federal debt
- Have financial resources to continue to make timely payments of ongoing property charges such as property taxes, insurance and Homeowner Association fees, etc.
- Participate in a consumer information session given by a HUD- approved HECM counselor
A reverse mortgage can help seniors to stay in their house while needing care, allow them to take out money to travel or for a remodel or to use as funds for a down payment for a home elsewhere. Whether it makes sense for you to do it depends on your situation, and a reverse mortgage specialist can always run an analysis and see how much it’s going to help. When asking when it makes sense to get a reverse mortgage, regardless of the housing market, current interest rates or length of time you plan to stay in your home, Homa said, “Anytime you get the fish out of the water, it is fresh!” It just depends on each person’s situation. If it helps you avoid foreclosure, pays bills, move closer to family, covers medical costs — whenever you need it is the best time.
This is a very brief overview of a topic that could be a tool for seniors to use if needed. If you are considering a reverse mortgage, before jumping in, we can always continue the discussion further. Gaining knowledge on any topic is a great way to continue to make smart financial decisions for yourself and your family.
If you missed the Chalk Talk and want to see it email us!
Free for clients, $10 for guests