Reverse Mortgage: An All-Purpose Retirement Planning Tool?
Tuesday, July 11, 2017

Reverse Mortgage: An All-Purpose Retirement Planning Tool?

For senior homeowners who have accrued home equity, a reverse mortgage provides access to cash. Plain and simple. There are a range of reasons why a homeowner might want to access the money in their home. However, real estate is not typically a liquid asset. You cannot simply sell your home to access the funds, because you still need a place to live. For that reason, homes are generally not the first thing that comes to mind when thinking of ways to fund retirement.

While Social Security and retirement savings accounts are generally the first thing that comes to mind when planning for retirement, home equity is often overlooked. Considering that home equity is generally the largest source of wealth for senior households, that money can go a long way towards funding a more comfortable retirement.

For example, a household with plenty of retirement savings may still desire to access the equity in their homes in order to help family members or perhaps fund community service. Someone with just enough savings to get by may choose to access their home equity so they can spend more time visiting with family or loved ones. And of course, when retirement savings will not cover all necessary expenses, home equity can provide a lifeline to fund medical expenses or other bills.

Reverse Mortgage Home Equity and Financial Wealth Chart

http://crr.bc.edu/wp-content/uploads/2017/02/IB_17-6.pdf

In his recent research brief “Is Home Equity an Underutilized Retirement Asset?” Steven Sass, research economist at the Center for Retirement Research at Boston College, concluded that “households entering retirement will increasingly need to tap their financial assets and home equity to maintain their living standards.”1 He points to the fact that for four out of five senior households age 65-69, the majority of their financial wealth is in their homes.

Although there is a large discrepancy between the wealth distributions of the fifth quintile versus the first, there is a need or desire to access home equity from all demographics. The key is in understanding what individual needs are.

While there are many products that feature the ability to tap into home equity, the terms for repayment can be an obstacle. Often times they require monthly payments and have limitations on the length of time the money can be borrowed before being repaid.

A Home Equity Conversion Mortgage or “reverse mortgage” is specifically designed for senior homeowners looking to tap into the equity in their homes and even eliminate their monthly mortgage payments2. It is a non-recourse loan and is insured by the Federal Housing Administration3. When compared to other options for accessing home equity, a reverse mortgage can be an attractive option.

Depending on each individual’s financial needs and goals, there are different reverse mortgage options that may be more or less suited for them. It is best to speak with a licensed advisor to make sure you get matched with the right product to suit your needs. To see how much you may qualify for, visit our Reverse Mortgage Calculator or, call 866-270-1376 to speak to a licensed advisor for a free loan analysis.

 

1 Is Home Equity An Underutilized Retirement Asset? – Center for Retirement Research at Boston College, by Steven A. Sass, March 2017, Number 17-6.

2 You must live in the home as your primary residence, continue to pay required property taxes and homeowners insurance, and maintain the home according to Federal Housing Administration requirements. Failing to meet these requirements can trigger a loan default that results in foreclosure.

Federal Housing Administration (FHA) mortgage insurance premiums (MIP) will accrue on your loan balance. You will be charged an initial MIP at closing. The initial MIP will be .5% or 2.5%, depending on your disbursements. Over the life of the loan, you will be charged an annual MIP that equals 1.25% of the outstanding mortgage balance.

Enjoy Your Life After Retirement
Friday, June 30, 2017

Enjoy Your Life After Retirement

You’ve worked for much of your life. Now it’s time to focus on fulfilling your retirement goals; however, if you are on a fixed income and concerned about finances, a rewarding retirement can be tricky. If you would like to live retirement to the fullest, but financial worries are holding you back, a reverse mortgage […]

Deciding If a Reverse Mortgage is Right for You
Thursday, June 15, 2017

Deciding If a Reverse Mortgage is Right for You

Reverse mortgages can be confusing, so it’s important to be informed and separate fact from fiction. Invite your family to be part of the process as well, so that everyone is on the same page. “Many senior homeowners who could truly benefit from a reverse mortgage have been discouraged from even looking into one by […]

What is the Role of Children in the Reverse Mortgage Process?
Wednesday, June 7, 2017

What is the Role of Children in the Reverse Mortgage Process?

Including your children in the decision to get a reverse mortgage is a key part of the process. Laurie Goodman, co-director of the Housing Finance Policy Center at DC’s Urban Institute, emphasized the importance of what she describes as intergenerational communication and collaboration. While it’s nice to leave something to your children, Goodman suspects that […]

Can You Stop a Reverse Mortgage?
Tuesday, May 23, 2017

Can You Stop a Reverse Mortgage?

Entering into a reverse mortgage is a big decision. It’s important to do your research and seek the advice of a financial advisor. One question that tends to be top of mind when entering into a reverse mortgage is whether the reverse mortgage can be stopped once papers are signed. Can you stop a reverse […]

How Do You Pay Back a Reverse Mortgage?
Tuesday, May 16, 2017

How Do You Pay Back a Reverse Mortgage?

The answer to this question depends on your specific situation. The Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, is federally regulated and insured by the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). HECMs make up the vast majority of reverse mortgages originated in the United […]

What is a Reverse Mortgage Purchase?
Thursday, May 4, 2017

What is a Reverse Mortgage Purchase?

You may be familiar with a traditional reverse mortgage; however, did you know that a reverse mortgage can also be used to buy a home? It’s called a Home Equity Conversion Mortgage (HECM) for purchase, and is sometimes referred to as a reverse mortgage purchase loan. A HECM for purchase allows seniors age 62 and […]

How Boomers Are Managing the Cost of Retirement
Thursday, April 27, 2017

How Boomers Are Managing the Cost of Retirement

Most boomers are taking steps to manage their spending and secure their nest egg. However, according to a recent study from the Bankers Life Center for a Secure Retirement, this may not be enough. In the years that followed the Great Recession, millions of middle-income Americans suffered severe financial setbacks. The Bankers Life study reported […]

Surprising Facts About Social Security
Wednesday, April 19, 2017

Surprising Facts About Social Security

For many Americans, social security benefits are a vital part of their retirement income plan. Therefore, it’s important to understand the rules and stay informed of any changes. Below are a few lesser-known facts about social security that may surprise you.1 Did you know that unmarried children under the age of 18 can receive benefits? […]

Consider Refinancing While Rates Are Still Low
Tuesday, April 11, 2017

Consider Refinancing While Rates Are Still Low

Mortgage interest rates are likely on the rise, so if you’re thinking about refinancing or buying a home, now may be a good time. Below are some helpful tips to keep in mind as you shop for a mortgage:1 Paying Attention to Interest Rates Even a small movement in mortgage rates can have a significant […]