If the ongoing pandemic has taught us anything so far, it’s shown how difficult it is to predict what lies ahead. In these uncertain times, one thing you can be sure of is a reverse mortgage.
Often overlooked and misunderstood, a reverse mortgage can provide financial stability during times of economic uncertainty. Many seniors who were considering selling because they thought they couldn’t afford to remain in their homes have either heard misinformation from someone else, or have not been properly educated on how a reverse mortgage works. Reverse mortgages convert your home’s equity into cash that can be used for any purpose: a lump sum, credit line or monthly payment, or a combination of any/all of those options, without having to make a monthly mortgage payment. While the homeowner is still responsible for property taxes, insurance and upkeep, they can benefit by extinguishing the payment on their current mortgage, setting up a credit line that increases over time, or receiving a monthly payment to supplement their income. Reverse mortgages are also non-recourse, meaning that you or your estate can never owe more than the value of the home when the loan is repaid.
The current economic conditions provide the “perfect storm” to consider a reverse mortgage: historically low interest rates combined with increased property values and higher program value limits ($765,600). For high-value homeowners, jumbo reverse mortgage products are also available with loan amounts up to $6 million. Senior homeowners currently have over $7 trillion in housing wealth.
You can also use a reverse mortgage to purchase a new primary residence without mortgage payments. Senior homeowners can use the proceeds from the reverse mortgage, plus the equity from the sale of a previous residence, to complete the purchase in a single transaction.
Think of a reverse mortgage as a type of HELOC (Home Equity Line of Credit). There are, however, some important distinctions. Monthly payments are not required and the credit line cannot be “frozen” even if home values decrease. More importantly, the less you use, the more you’ll be able to borrow later, as the unused amount grows over time (like a savings account). Additionally, proceeds are not considered income, therefore they are non-taxable.
The requirements for a reverse mortgage are as follows: the property must be your primary residence, you should have at least 50 percent equity, and one borrower must be age 62 or older.
Simply put, if you don’t have enough money saved for retirement, Social Security alone will likely not be enough to meet the increases in the cost of living. A recent report said that 40 percent of adults would not be able to come up with $400 for an unexpected expense and 25 percent have no retirement savings at all.
Even if you’ve done all the right things, you still might not be able to make ends meet. A reverse mortgage can possibly allow you to defer Social Security by utilizing your home equity until you decide to receive payments. While expenses are only going up, keep in mind loan proceeds can be used for any purpose. Let it help cover healthcare costs or make needed improvements or modifications to your home. Pay off high-interest credit cards and loans and enjoy overall better financial security during this time. No one should have to struggle in their golden years if they have home equity. Reverse mortgages were created so that seniors can remain comfortably in their homes.
Russell Tunick has been in the mortgage industry for 25 years, and in particular, has focused exclusively on reverse mortgages for the last 12 years. Clients love using Russell because he understands that many seniors are financially unprepared and that he is dedicated to finding solutions that improve their quality of life. Russell makes the reverse mortgage process easy to grasp by walking his customers step-by-step through the process at a comfortable pace. When not working, Russell enjoys spending time outdoors with his family and two dogs.
Russell is the Vice President Of Sales, Reverse Mortgage Division, of Family First Funding LLC. He can be reached at: (917) 538-7177 or via email at: [email protected]. NMLS ID# 305398. Russell also works closely with his colleague and longtime Jewish Link advertiser Jason Berg, Vice President of Sales at Family First Funding LLC. Jason can be reached at: 201-308-5580 or 917-612-0559, or via email at: [email protected]. NMLS #: 220661