Seniors are surprised and comforted with the stability an FHA insured reverse mortgage can give to their retirement. For homeowners 62 or older with significant equity in their homes, a reverse mortgage can help them improve cash flow, get a lump sum of cash, and even establish a line of credit for future expenses, all without incurring a monthly payment and actually eliminating their monthly mortgage payment while maintaining full title to their home.
Many seniors are equity rich but cash flow poor; the reverse mortgage was created by Congress and signed into law in 1988 by President Reagan as an FHA insured tool designed to help those seniors unlock the equity in their homes with flexible options that they control themselves. The key to a reverse mortgage is that the homeowner will never have a payment on their mortgage or the cash they access, whether accessed through a regular monthly payment for life or a line of credit they access as needed, as long as they live in the home as their primary residence.
An option some seniors have used to increase their retirement stability is use of a line of credit from their reverse mortgage to eliminate their house payment and have a significant line of credit on standby to be used as needed for future expenses, whether household, medical, or emergency in nature. These senior homeowners have the comfort of knowing that cash is readily available anytime from this line of credit & that any unused portion of the line of credit will grow at the reverse mortgage interest rate, giving them access to an increasing amount of money available overtime.
A tenure payment to the homeowner is also available; based on the age of the younger homeowner, the equity in their home and current interest rates, using FHA software, a monthly payment is determined that the homeowner will receive for life or as long as they live in their home. This is an FHA insured monthly payment that is received by the homeowner as long as they live in the home and which will never stop regardless of their future equity in the home. Under a reverse mortgage, the homeowner maintains title to their home and will never owe more than the net proceeds from their home at the time of a potential future sale.
FHA will begin to require qualifying for Reverse Mortgages for the first time as of March 2nd, 2015. But there’s still time… for loan applications received by February 15th, current rules are simple: are you 62 and do you have sufficient equity in your home? FHA will be adding “Financial Assessment” as a qualifying requirement. This FHA Financial Assessment will use the reverse mortgage applicants’ tax returns, asset statements, credit history & credit score to determine the applicants’ capacity & willingness to pay their property taxes, homeowners insurance and to meet their other financial obligations. So older homeowners that initiate their reverse mortgage applications in the next few weeks will have the benefit of a much simpler application and approval process that now requires only minimal borrower documentation and does NOT include any income, asset or credit qualifying.
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