How To Use A Reverse Mortgage To Live Longer In Your Home

If you’re a homeowner and at least 62 years old, you may be wondering if a Home Equity Conversion Mortgage - commonly referred to as a HECM or reverse mortgage – is right for you. A reverse mortgage increases your cash flow, making it easier for you to finance home renovations. Modifying or updating your home can help make it a more comfortable and safer place to live. The extra cash can also help you pay for medical expenses, in-home care, and everyday living expenses. The choice is yours.

Financially prepare to live in your home with a reverse mortgage

A reverse mortgage is a loan against your home that you don’t have to repay as long as you are living there as your primary residence. It may be easier to understand how a reverse mortgage works if you consider your home’s current or fully-paid mortgage as a forward mortgage.
When you buy a home with a forward mortgage, your monthly mortgage payment reduces your debt over the years until it’s totally paid off. Also, your equity in the home rises over the years. Equity is the amount of money you’ve repaid on your mortgage, plus any increase in your home’s value since you began making payments.
When you take out a reverse mortgage, you’re not required to make monthly mortgage payments. Instead, your reverse mortgage’s lender sends you money - usually every month – or provides funds when you request them. However, this doesn’t mean related homeowner’s debts disappear. You’ll need to keep current with property taxes, homeowner insurance, HOA fees, and any other similar obligations, in addition to maintaining the property in good condition.

Using HECM funds to remodel your home

Roof repairs or replacements, as well as kitchen and bathroom renovations, are three common home improvements often made using reverse mortgage proceeds.
Make sure the remodel or renovation is worth what you’re putting into it. First, decide if you are committed to staying in your home for your retirement. If you are unsure if your neighborhood and the housing market will support the amount of money you are putting into your home, discuss your plans with a real estate agent.

Alternatives to remodeling your home

If you’re concerned that your home may need more work than it’s worth, you can use a reverse mortgage to buy a new home for your retirement without a mortgage payment. If you have a large home where you’ve raised your children, you might consider downsizing to a home that is a more manageable size to maintain, or a new home in an active- adult retirement community.
A HECM for Purchase allows seniors age 62 or older to purchase a new principal (or primary) residence using loan proceeds from the reverse mortgage. To do so, you must have a down payment large enough to pay the difference between the HECM proceeds and the sale price, plus closing costs for the property you are purchasing.
The reverse loan amount you are eligible for depends on a few factors: your age, the value of the new home and the amount of the down payment. Discuss your plans with a Certainty Home Loans Reverse Mortgage Specialist so they can evaluate your HECM financing options.

Will I still own my home?

A reverse mortgage does not require you to give up ownership of your home. As the borrower, your name remains on the title, and the home remains yours while you continue to live there. This means you’re required to continue paying associated taxes on time, maintain your homeowner insurance policy, and keep your home maintained.

When does a reverse mortgage need to be repaid?

Once you no longer live in the home, the reverse mortgage’s balance, including interest and fees, must be repaid. * For example, if you eventually decide to move to an assisted living facility or live with relatives, you can choose to sell your home to repay the reverse mortgage. If you decide not to sell your home, you or your heirs may decide to arrange repayment with another source of funds.

You or your heirs will never owe more than the value of your home when the loan becomes due. A HECM (Home Equity Conversion Mortgage) reverse mortgage is insured by the Federal Housing Administration. And if the reverse mortgage’s balance is less than the market value of your home, the additional equity will be there for you or your heirs when the home is sold.
It’s a good idea to discuss these options with your children or heirs if they were expecting to inherit your house.
To learn more, contact a Certainty Home Loans loan officer in Colorado, Florida, Georgia, Kansas, Oklahoma, and Texas, and ask to speak to an experienced Reverse Mortgage Loan Officer. (If you apply for a reverse mortgage, you’ll be required to meet with an independent certified HECM Origination Counselor.)
*Failure to maintain loan obligations will require the loan to be repaid or may result in foreclosure proceedings.
- Jul 23, 2019