What is a Reverse Mortgage?
Answers from Kyle Buck of American Pacific Mortgage in Eagle, Idaho.
It seems like you cannot turn the TV on anymore without seeing a commercial for reverse mortgages but what are they? Reverse mortgages can be a great way for qualified Idaho homeowners who are 62 years of age or more to access the equity in their homes without having to make monthly mortgage payments. Reverse mortgage is a highly regulated program through FHA that provides a number of benefits for the right borrower. The program is designed with several protections for the borrower to make sure it is the right fit. Some of those protections include Reverse Mortgage Counseling, Mortgage Insurance, and Servicing.
Reverse mortgages are also known as a HECM mortgage or Home Equity Conversion Mortgage. Reverse mortgages have been around for decades in the United States. In fact, the first reverse mortgage was written in the U.S. was 1961. The program did not catch on until 1988 when the Federal Housing Authority Insurance Program was signed into law. Since 1998, over 500,000 reverse mortgages have been written, making these federally insured programs the most popular way for senior homeowners to access the equity in their homes.
What is the difference between a traditional mortgage and reverse mortgage?
A traditional Mortgage: you make a monthly payment to the bank
When you bought your home originally, you may have taken out a mortgage from a bank. As you made your mortgage payments each month, the amount you owed on your home got smaller, and the equity you owned in your home got larger.
A reverse mortgage: no monthly mortgage payment and in some cases the bank pays you
With a reverse mortgage, you do not make a monthly mortgage payment and in some cases the bank pays you. Borrowers qualify based on their age for a percentage of the value of the home. This calculation is the same in Idaho as it is in any other state. The funds available can be taken in a lump sum, monthly payments, or can be kept in a line of credit for later use. You can repay the loan balance at anytime or when the home is no longer your primary residence. Like a traditional mortgage, you are still responsible for your real estate taxes, homeowner’s insurance and HOA fees if applicable, but no longer have a monthly mortgage payment.
Who are Reverse Mortgages For?
Reverse mortgages are for those who are looking for a way to comfortably enjoy their retirement. The program could be a solution for the senior who is struggling and needs to get out from under a mortgage payment so they can afford their medicines, pay their utilities and go to dinner once in a while. In some cases, reverse mortgages can also help seniors save their home from foreclosure providing the opportunity to continue living in their home.
What do financial advisors think of reverse mortgage? Overall, many are in favor of reverse mortgages when used correctly. The idea of using the tax-free proceeds of a reverse mortgage rather than withdrawals from your tax-deferred investments, such as an IRA or 401(k) often are in line with a solid financial plan.
In the most recent years, reverse mortgage has opened up the doors to purchasing a home as well. Yes, you can buy a home with a mortgage and not have a monthly mortgage payment. This program allows buyers to use their cash to match their long term goals and still buy the home they want.
What is the goal?
Seniors 62+ are looking at retirement, making their savings go farther, needing additional income, medical needs, financial stress relief, or wanting to get more out of their silver years. Reverse mortgages have been used for all of these things and much more. Loan proceeds can be used for almost anything.
Are Reverse Mortgages Available in Idaho?
Yes, they are.
You Need a Reverse Mortgage Specialist
It is recommended you work with a Reverse Mortgage Specialist when considering this life changing program. It is not a one size fits all program as there are over a dozen different reverse mortgage programs available. Many banks and mortgage companies do not offer reverse mortgage so working with a specialist who will match the goals of the borrower to the programs best suited for them is key.
The Reverse Mortgage is not only nice, IT’S ESSENTIAL! With expenses going up we were able to add what we would have spent on our house payment to our monthly budget.Mrs. Hughes
Working with Kyle Buck made the difference in getting our loan done!Ed
I have lived in my home for 15 years and was going to lose it to foreclosure. Working with Kyle saved my home and now I can live here as long as I want without the financial stress of making another house payment.Jerry