Cash to Cover Expenses. Funds to Achieve Dreams.
A QUICK Q & A GUIDE ON HOW TO OPTIMIZE RETIREMENT CASH FLOW
What is a reverse mortgage?
• It’s a special type of loan that enables individuals age
62 or older to convert some of their home’s equity into tax-free1 cash or to purchase a new principal residence.
• Unlike traditional equity loans, no repayment is
required until the home is no longer the principal residence.
Who is eligible?
• Homeowner(s) who are at least 62 years of age and occupy the property as their principal residence are eligible.
• Eligible properties include single-family homes, condominiums and townhomes, or 2- to 4-unit dwellings.
• For refinances, the home must be owned free and clear, or have a remaining balance that can be paid off with the reverse mortgage.
• A reverse mortgage has no income, employment or credit requirements2.
How much cash can someone receive?
• The loan proceeds available from a reverse mortgage are based on a formula that factors in the age of the borrower (s), the appraised value, and sales price if applicable, of the property. The formula may also include the interest rate and the county where the property is located.
What are some of the benefits?
• The reverse mortgage customer retains ownership of the home.
• Cash advances can be used for any purpose.
• Loan proceeds are not considered income and will not affect Social Security or Medicare benefits. However, your monthly reverse mortgage advances may affect your eligibility for some other programs. Consult either your local program offices or your attorney to determine how, or if, monthly reverse mortgage payments might affect your specific situation.
• The heirs can keep the home after the reverse
mortgage is repaid.
What type of interest rate options are there?
• he reverse mortgage is available with a fixed or an adjustable interest rate. The homeowner can choose from a variety of rate adjustment periods.
• On an adjustable-rate loan, any adjustment in the rate has
no effect on the amount or the number of loan advances the customer can receive, but may cause the loan balance to grow at a faster or slower rate.
What are the tax-free1 cash options?
• Lump sum advances make cash immediately available.
• Tenure plans provide fixed, monthly cash advances.
• Line of credit makes cash available upon request.
What are the costs involved with a reverse mortgage?
• There are closing costs, which can be financed into the loan. These may include an origination charge, title insurance, appraisal, a mortgage insurance premium and attorney fees.
• Typically, the out of pocket expense is limited to the cost of an appraisal.
• The customer is required to keep real estate taxes and hazard insurance premiums current.
• The customer is expected to continue to maintain the property.
How is the loan repaid?
• A reverse mortgage is due and payable when the property is no longer considered the customer’s principal residence.
• The loan must be repaid in one payment either from the sale of the home or through other resources.
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