A reverse mortgage can offer a person who is 62 years or older an opportunity to supplement their retirement income or pay off the remainder of a mortgage. A reverse mortgage can be highly beneficial in almost all situations. If you are a senior citizen homeowner who is considering a reverse mortgage, and you want to understand the process and the insurance requirements more clearly, contact Dan Turner with Geneva Financial today. We assist clients in the regions of Hawaii, Illinois, and Ohio.

Reverse Mortgage Basics

In a reverse mortgage, the equity in your home is converted into an amount of cash or a line of credit, or monthly income payments for a period of time, or a term. Several streams can be paid to the Borrower simultaneously if desired, and adequate equity is available. If equity runs short? the insurance guarantees the income for the LIFE of the occupancy of the Borrower. This means that in “Medicaid” Cases? The home equity cannot be drained to pay Medicaid, and the residual value of the home is protected.

There are also several simple strategies that can restore the function and add buffering safety and stability to your life. Unlike a traditional mortgage, in which you make monthly mortgage payments to a lender, in a reverse mortgage, the lender pays you, allowing you to use money that you have invested in your home as cash. In all Reverse programs, payments to the Lender are optional, and can be made if the Client sees a financial advantage to making payments.

The borrower can use the money from the loan for any purpose they choose, including home improvements, health care costs, living expenses, income or equity needs, travel, college assistance, charity, purchasing rental or vacation homes, or any other good reasons. The loan becomes due and is cured if the borrower moves out, sells the home, or dies. There are three main types of reverse mortgages: single purpose reverse mortgages, proprietary (private) loans, and federally insured reverse mortgages, also known as Home Equity Conversion Mortgages (HECM’s). Of these, I recommend the FHA HECM-HELOC or the Jumbo HELOC (for Condominiums that don’t qualify as “FHA Approved”) above $500,000.00).

Do I Need Reverse Mortgage Insurance?

There are particular additional costs associated with the FHA reverse mortgage, and many people wonder if they need reverse mortgage insurance. Reverse mortgage requirements are different depending on what type of reverse loan you get. If you choose to use the government-insured Home Equity Conversion Mortgage, FHA reverse mortgage insurance premiums are available. The premiums for this protection is usually buried in the loan costs so no out-of-pocket funds are needed. The Client may also choose to pay these out of pocket at the close if there is any advantage to the Borrower for doing that. While it is an expense that other mortgages don’t have, it is also true that the value of this protection provides some very remarkable benefits for the Homeowner, and doing without it is typically a bad idea.

Reverse mortgage insurance guarantees that borrowers will continue receiving cash or credit throughout the duration of the reverse mortgage, even if the lender goes out of business. It guarantees the HELOC credit line growth. It also guarantees the line of credit can never be cancelled, suspended, or reduced, and is not a 10 year plan (as is commonly offered in the Banks). It is guaranteed for the lives of both Borrowers. It doesn’t guarantee that you’ll pay your taxes on time, or keep your insurance in force, or that you’ll maintain and occupy your home as your Primary residence (but), since that’s the way you’ve always lived, very few people have an issue with this, and (in fact) is the same rules in the mortgage you have presently. While it also protects lenders in case a borrower defaults, it is CLEAR that this insurance guarantees the Client’s ability to live their lives safely while using significant sums of home equity without mandatory decades of ongoing payments or risk of losing their homes.

Not all reverse mortgages require insurance. Some private and single purpose reverse mortgages do not call for reverse mortgage insurance, and they are greatly disabled when compared to the safety and flexibility of the FHA insured program.

Understanding Reverse Mortgages and Insurance

There are a wide variety of reverse mortgage types, and it can often be confusing to understand which one could possibly work best for your situation and benefit you financially.  If you want to learn more about your reverse mortgage options in the areas of Hawaii, Illinois, or Ohio, ASK your FINANCIAL ADVISOR to contact Dan Turner with Geneva Financial. We can work closely with them to help you to determine your housing and financial goals, and find a reverse mortgage that suits your unique situation.