Reverse Mortgage Loan Program
Are you close to retirement and looking for that extra gas financially to make your retirement more enjoyable,, have you considered a Reverse Mortgage Program?
Reverse mortgages are a great tool, especially for older borrowers over the age of 62, to give your retirement some extra juice. But older borrowers are not the only ones who benefit the most from reverse mortgage loan programs. Some lenders at times will lower the age to 60, but this depends on a myraid of factors.
In fact, many borrowers don’t even realize that reverse mortgages are quite popular. The U.S. Department of Housing and Urban Development (HUD), through FHA, insures thousands of reverse mortgages each year.1
Unlike a regular mortgage where you pay a lender on a monthly basis in order to purchase or refinance your home, a reverse mortgage pays you every month by incrementally converting your home’s equity into regular cash distributions. The loan is repaid once the home is sold, you move out, or the last surviving borrower passes away.
You must maintain the taxes, insurance and upkeep of the property at all times. The property must be your primary home, however you may want to inquire inquire if you can rent out rooms while living in the property as a form of additional income. Restrictions and conditions vary, so make sure to read your note when considering situations like this.
New Century Mortgage has been able to help clients just like you improve liquidity and supplement their income by utilizing a reverse mortgage loan program. But which reverse loan program will you choose to go with?
Here is a quick overview of reverse mortgages, their history, as well as reverse mortgage loan programs that might benefit you.
Reverse Mortgage Loan Program: A Brief History
Compared to other home loan programs, reverse mortgages are relatively new. Reverse mortgages popped up in the early 1960’s, but didn’t really become prominent until the late 1980’s when the Housing and Community Development Act was introduced.2
While lending standards for reverse mortgages were always perceptively tighter than their traditional counterparts, they became even more highly regulated after the financial crisis of 2008, and a steep decline in reverse mortgage originations occurred as a result.2
However, over the last few years, reverse mortgages have become making a bit of a comeback. The National Reverse Mortgage Lenders Association (NRMLA) notes that housing wealth has grown over the last few years, but as other financial markets continue to remain volatile, more and more borrowers are turning to reverse mortgages to supplement retirement savings.3
The uptick in borrowers seeking reverse mortgage options is also a result of more educated consumers. Borrowers understand reverse mortgage much better, resulting in more borrowers taking advantage of reverse mortgage loan programs.
Reverse Mortgage Loan Programs
There are several reverse mortgage loan programs available to borrowers looking to either refinance or make a new purchase.
One of the more popular programs is the Home Equity Conversion Mortgage (HECM) program, which is insured by the FHA, where you can use to purchase a new primary residence if you are age 62 or older4.
One stipulation of this program is that you have to have assets to cover the down payment4.
Furthermore, not all properties are eligible for the HECM program, including cooperative units and some manufactured homes4.
You may also have to pay closing costs to secure the mortgage. In fact, upfront costs can sometimes be more than a traditional mortgage. However those costs can often be negotiated to be paid by the seller (some restrictions apply)4.
How much you can borrow with a HECM program often boils down to several factors, including your age and type of reverse mortgage you select. Other things that are considered include the appraised value of your home, where current interest rates are at, and your ability to pay common expenses to maintain the property, such as homeowners insurance and property taxes.
Other reverse mortgage programs are available to borrowers that are not insured by the federal government and include, but are not limited to, single-purpose and proprietary reverse mortgage solutions5. These programs have their own set of rules and standards for qualification.
Reverse Mortgage Loan Program – Further Inquiry
Want to learn more about Reverse Mortgage Loan Programs? New Century Mortgage can answer all your reverse mortgage related questions. Reverse Mortgages take time to plan out and discuss, as it is important for you to do your due diligence. You may want to consider all factors, such if you plan to pass down the house you live in to others. As this might something to ponder if a reverse mortgage is for you or not.
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1 Annual HECM Endorsement Chart. (2020, June 10). Retrieved June 19, 2020, fromhttps://www.nrmlaonline.org/2020/06/10/annual-hecm-endorsement-chart
2 Pfau, W. (2018, November 30). A Brief History of Reverse Mortgages in The United States. Retrieved June 19, 2020, from https://www.forbes.com/sites/wadepfau/2018/11/29/a-brief-history-of-reverse-mortgages-in-the-united-states/#3269e1be1ba3
3 Reverse mortgages get second look amid coronavirus chaos. (2020, May 15). Retrieved June 19, 2020, fromhttps://www.housingwire.com/articles/reverse-mortgages-get-second-look-amid-coronavirus-chaos/
4 Can I use a reverse mortgage loan to buy a home? (n.d.). Retrieved June 19, 2020, from https://www.consumerfinance.gov/ask-cfpb/can-i-use-a-reverse-mortgage-loan-to-buy-a-home-en-238/#:~:text= Can I use a reverse mortgage loan to buy a, residence with HECM loan proceeds.
5 Reverse Mortgages. (2018, March 13). Retrieved June 19, 2020, from https://www.consumer.ftc.gov/articles/0192-reverse-mortgages