A recent article from CNBC.com reveals that applications for reverse mortgages were up 15% in March 20201. Many seniors are doing their research and are seeing how a reverse mortgage can be beneficial with the current economic climate.
A reverse mortgage loan is available to homeowners who are 62 years and older. It allows seniors to take part of their home’s equity and turn it into cash, monthly payments, or a line of credit. Many borrowers use a reverse mortgage to pay off their current mortgage which eliminates their monthly mortgage payment and can provide much needed extra cash flow.2 Likewise, if a senior is looking to continue to shelter-in-place during this crisis, reverse mortgage proceeds can be used immediately to help cover daily expenses.
Increase in Counseling Sessions
The decision to proceed with a reverse mortgage is an important one. To ensure borrowers are making an informed decision about all aspects of a reverse mortgage there is a mandatory counseling session with an independent counselor. Many counselors have reported seeing an increase in counseling sessions with potential borrowers coming to the session well-informed about the benefits of a reverse mortgage.3
The counseling covers a range of topics that could affect your decision on whether a reverse mortgage is right for you. Counseling sessions include discussions on how a reverse mortgage can impact your eligibility for federal and state programs, income tax consequences, impacts on your estate, what types of payments you will be making to other parties, and most notably, the other options available to you.
The most important thing that a Housing and Urban Development (HUD) approved counselor can provide is unbiased information on whether or not a reverse mortgage is the right decision for you. The whole purpose of counseling is to educate and empower you in making a sound decision for your financial situation.
If you are interested in learning how a reverse mortgage may benefit you, call (800) 976-6211 to speak with a licensed reverse mortgage specialist.
2 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. The borrower must live in the home as their 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.