COVID-19 (sometimes referred to as the novel coronavirus) has altered the world as we know it. Hopefully, things will get back to normal, but it could take a while. In the meantime, many are watching the stock market fluctuate into areas not seen since 2008 and are also worrying about increased healthcare costs, possible food shortages, and their retirement savings. All of these concerns can lead to worry and stress, especially to a senior who is trying to make ends meet.
In a recent article from Forbes, if you are retired or contemplating retiring soon, this could be a good time to tap into the equity of your home with a reverse mortgage loan.1 While property values are still high across the country, home equity can provide an immediate increase in funds during these times of uncertainty.1
A reverse mortgage allows qualified homeowners, who are 62 years or older, access a portion of their home equity as cash. Reverse mortgage borrowers do not have to repay the loan as long as they live in the home as their primary residence, pay property taxes and insurance, and maintain the property according to the Federal Housing Administration (FHA) requirements.2
The amount of equity you may qualify to access is determined by the age of the youngest borrower, current interest rates, your ability to manage your financial obligations, and the value of your home. Keep in mind, you may need to set aside additional funds from loan proceeds to pay for taxes and insurance.
You may be able to replace your current mortgage with a reverse mortgage, which will eliminate your monthly mortgage payment2 and increase your cash flow. For example, if your current mortgage payment is $1,800 a month, eliminating that monthly payment frees up $21,600 annually which you can use any way you want.
You can select to receive the funds from a reverse mortgage as monthly payments. This is beneficial if you are having difficulty covering your ongoing living expenses.
You may also choose to establish a line of credit with your loan proceeds. The reverse mortgage line of credit grows over time 3 and is available any time you need it. You can draw in any amount until the line of credit is exhausted. This option is often used by seniors who are concerned that they don’t have enough savings for future occurrences.
If you are experiencing financial stress due to the current economic environment, a reverse mortgage may be able to help. Call 1-800-976-6211 to speak with a licensed loan officer.
2You 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. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
3 The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.