The Paseo Financial Group
The amount of your reverse mortgage is based on how old you are, how much your home is worth, and the interest rate that you are offered on the loan.
Your borrowing power increases:
* When you are older. An 80-year-old will be able to borrow more than a 62-year-old if all other factors are equal.
* If your home is more valuable and/or you have a higher amount of home equity.
* As interest rates fall. You will be able to borrow more at a 4% rate than a 6% rate.
One of the best features of the HECM program is that borrowers are given a great deal of flexibility in how they receive the proceeds of the reverse mortgage.
There are four basic options:
* Withdraw a lump sum of cash when the loan closes.
* Receive a monthly annuity for as long as the borrower lives in the house. This is called a “tenure” annuity.
* Receive a monthly annuity for a set period chosen by the borrower. This is a “term” annuity.
* Take out a line of credit that can be used at the borrower’s discretion. This credit line grows with the passage of time.
Of course, a senior obtaining a reverse mortgage also can choose to combine multiple options into a plan that best suits his or her needs. For example, a senior could choose to take out a certain amount of cash at closing while also receiving an annuity.
With a reverse mortgage, there is no loan to repay if you are alive, living in the home, and adhering to the terms of your loan. You can have the money disbursed to you in the form of a check or a line of credit. Lump sum payments also are popular. Statistically, about 73% of borrowers chose a lump sum payment.
The loan generally does not have to be paid back until either the last surviving homeowner dies or moves out of the home. After that happens, the estate typically sells that home and uses the proceeds to repay the reverse mortgage loan. If there is extra money left over, the heirs get to keep it. If the house is sold and there is not enough money to repay the payments that the lender has made, then it’s tough luck for the lender. They must accept the financial loss and cannot go after the heirs for the balance.
Melanie Sedam is a HUD-certified HECM mortgage originator and owns ReverseMortgage62AZ.com, which specializes in mortgage financing in the 55+ communities of Arizona. She can be reached by simply calling 520-829-5219 or emailing her at Melanie@ReverseMortgage62AZ.com. There also is a 35-minute PowerPoint presentation on her website that goes in the financial details/numbers of a reverse mortgage loan.