Baby boomers are the rising senior population and like to live life to the fullest. With the rising cost of food, medical expenses and housing, seniors have to really look at their budgets. A reverse mortgage is for those 62 and older to utilize the equity in their home. It's a federally insured loan through the Federal Housing Administration, which uses FHA-approved appraisers to determine the home's value and charges a 2 percent mortgage insurance premium fee.
The FHA also requires borrowers to participate in HUD-approved (Department of Housing and Urban Development) counseling before submitting an application to a lender. The home needs to be their primary residence. There are no income or credit requirements.
Once approved, seniors can receive tax-free cash in the way of monthly income, a credit line, a lump sum, or any combination. Homeowners must still pay their own taxes and insurance.
Proceeds from the loan do not affect Social Security or Medicare benefits. The simple formula to determine how much an individual is eligible for is based on their age, address and current interest rates. Generally, the more valuable the house, the older the homeowner is, and the lower the interest rate, the more can be borrowed. The FHA limit on home values for reverse mortgages was recently raised to $625,500. The proceeds the senior receives is a formula based on their age, so a 62-year-old would receive less cash than an 82-year-old, with all else being the same. Since the programs are insured through the FHA, even if there is a severe decline in home values, the senior is protected.
A reverse mortgage can also pay off a delinquent mortgage and save a home from foreclosure. It can help leave seniors' investments intact. Seniors can then make use of getting tax-free cash from their equity, with possible uses including donations to a church while the senior is still alive to enjoy the donation, a kitchen remodeling, a car or travel.
Seniors make no payments as long as they occupy the home. Any excess money belongs to the estate after the mortgage debt and associated fees are paid.
The law has recently changed so seniors can even purchase a new home with a reverse mortgage to replace their existing home –– for example, if the one they're in has stairs and isn't suitable.
Seniors can receive their money
• in lump sum at closing,
• monthly payments for as long as they live in the home,
• monthly payments for a fixed number of months or years,
• a line of credit they can draw on when they need it,
• or a combination of the options that best meet their needs.
What about heirs? After repayment by sale of the home or refinance, the remaining equity remains with the estate.
Source
No comments:
Post a Comment