A reverse mortgage is a Federal Housing Administration (FHA) insured loan2 which allows borrowers, who are 62 and older, to access a portion of their home’s equity without having to make monthly mortgage payments.3 Many borrowers use a reverse mortgage to pay off their current mortgage loan which eliminates their monthly mortgage payment and can provide much-needed extra cash flow.4 You can even use the proceeds of your reverse mortgage to consolidate your high-interest credit cards and other loans.
A reverse mortgage option that offers flexibility is a reverse mortgage line of credit. Unlike a traditional reverse mortgage where the proceeds are withdrawn in a lump sum immediately after closing, the proceeds from a line of credit may appreciate over time. You can withdraw from the line of credit at any time. What isn’t withdrawn will continue to grow, independent of your home’s value. The less you take upfront, the more you’ll be able to borrow later.
If you meet your loan obligations, your reverse mortgage line of credit will not be reduced. For someone who doesn’t need the money right away, the reverse mortgage line of credit growth option can be a long-term strategy that can be used as part of a financial retirement plan.
If you are interested in how a reverse mortgage can help with planning for retirement, call 800 976-6211 to speak with a licensed loan advisor.
2 As required by the Federal Housing Administration (FHA), you will be charged an up-front mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance.
3 Your current mortgage, if any, must be paid off using the proceeds from your HECM loan. You must still 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.
4 Your HECM loan will accrue interest that together with the principal will have to be repaid when the loan becomes due.