Senior housing wealth has been steadily growing and continues to break records. In a recent report, homeowners who are 62 and older have increased their wealth by 1.6 percent or $121 billion in the third quarter of 2020 and reached a record $7.82 trillion1. There are multiple ways to access your equity, such as selling and downsizing, but what are your options if you want to remain in your home? A reverse mortgage may be what you’re looking for.
Only 1% of eligible homeowners have a reverse mortgage loan.2 With all this amassed housing wealth, why aren’t seniors using it to their advantage? 
Advantages of a Reverse Mortgage
- A reverse mortgage loan allows homeowners who are 62 and older to convert a portion of their home equity into usable funds.
- No monthly mortgage payments are required as long as the borrower continues to meet the loan obligations.3
- Most of the closing costs and fees associated with a reverse mortgage loan can be financed into the loan, so out-of-pocket expenses are kept to a minimum.
- Loan proceeds can be collected as a lump sum (fixed-rate only), a line of credit to be drawn upon as needed4, a monthly payment for a set period or as long as you live in the home, or a combination of these options.
- To qualify, you must meet the age requirements, have enough equity in your home, live in the home as your primary residence, the home must meet Federal Housing Authority (FHA) property standards, and you must meet financial eligibility criteria as established by the U.S. Department of Housing and Urban Development (HUD).
- Reverse mortgages are non-recourse loans which protects the borrower from ever having to pay back more than what the home is worth.
- Home Equity Conversion Mortgages (HECM), the most common type of reverse mortgage loans, are insured by the FHA.4 The mortgage insurance guarantees that you will receive expected loan advances. You can finance the mortgage insurance premium (MIP) as part of your loan.
- Counseling with an approved counselor is required. The counselor will discuss program eligibility requirements, financial implications, and other alternatives to a reverse mortgage and repaying the loan.
- Another option is a jumbo reverse mortgage which allows owners of high-valued homes that exceed the 2021 HECM limit of $822,375 access to more of the equity in their homes. Jumbo reverse mortgages aren’t insured by the FHA so some of the requirements might differ from HECM’s. Some jumbo reverse mortgages allow homeowners to access up to $4 million (varies by lender).
Are you interested in tapping into your home equity with a reverse mortgage? Call 800.976.6211 to speak with a licensed loan officer.
Disclosures:
1 https://www.nrmlaonline.org/about/press-releases/senior-housing-wealth-reaches-record-7-82-trillion
2 https://www.brookings.edu/wp-content/uploads/2019/10/ES_20191024_BailyHarrisWang-1.pdf
3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements.
4 The funds available to the borrower may be restricted for the first 12 months after loan closing, due to HECM reverse mortgage requirements. In addition, the borrower may need to set aside additional funds from the loan proceeds to pay for taxes and insurance.