Why Consider a Reverse Mortgage Loan?
The most common reverse mortgage today is the FHA-insured Home Equity Conversion Mortgage, or HECM. Like most mortgages, a HECM is secured by a deed of trust lien against the borrower’s primary residence as collateral. However, is does have some special features. It is designed specifically for older homeowners – at least one borrower must be age 62 or better. It allows the homeowner to convert a portion of their home equity, or housing wealth, into cash either in the form of a lump sum disbursement, monthly draws, a line of credit, or a combination of these. Any cash received is not *taxable as income as it is loan proceeds. There is no required monthly principal and interest payment as HECM’s are payment optional (i.e. – pay as little or as much as you want when you want). To keep the loan active, at least one borrower needs to occupy and maintain the home as their primary residence and pay the taxes, insurance and HOA fees, if applicable. The loan is due and payable when the owner(s) sell the home or no longer live in the home as their primary residence. It may also become due and payable if the owner fails to meet the terms of the loan (e.g. – pay the taxes and insurance). These advantages can provide the owner with better cash flow and increased liquidity – both of which are critical in retirement.
So how does this potentially help with funeral planning and ‘life’ planning after the loss of a spouse or loved one? A reverse mortgage could provide a cost effective source of needed funds to cover any costs and provide for future needs. Not everyone should have a reverse mortgage. But everyone should understand what they are, how they work and the potential benefits. It could be the perfect solution in your time of need. Learn more below.
A Reverse Mortgage Loan Could:
- Provide funds to pay final expenses either when needed or for pre-planning;
- Eliminate an existing mortgage to allow a surviving spouse to continue to live in the home with no monthly mortgage payment (must pay taxes and insurance and maintain the home)
- Provide additional monthly cash flow to offset the loss of income due to the death of a spouse;
- Provide funds to pay medical bills, home health care costs, health insurance premiums, other debts or obligations, etc.
*This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation. Copyright©2021 Fairway Independent Mortgage Corporation (“Fairway”) NMLS#2289. 4750 S. Biltmore Lane, Madison, WI53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUDapproved agency. The youngest borrower must be at least 62 years old. Monthly reverse mortgage advances may affect eligibility for some other programs. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.