Doug’s Blog

Is a reverse mortgage right for you…for retirees worried about running out of money it might be the smart thing to do.

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If you are starting to seriously think about retirement, as both my wife Melanie and I are, and meeting with your financial advisor on at minimum a semi-annual basis to fine tune and review your custom-tailored retirement plan, part of that discussion should be the Reverse Mortgage Refinance, if you plan to retire in the home you currently live in or a Reverse Mortgage Purchase, if you plan on selling your existing home and buying a retirement property somewhere. Reverse Mortgage refinances allows a homeowner 62-tewars and older to access the equity in their property without paying a monthly mortgage or taxes on the proceeds. These basis rules apply – primary residence, live in full-time, and no delinquent federal debts. There are no income or credit considerations to be made. Homeowners that use the reverse mortgage refinance can either do what’s called a “no-cash out” refinance, “cash-out refinance”, i.e. a one-time payment, or received a monthly stipend.  The amount of money you can receive is based on a sliding scale of life expectancy, i.e. the older you are the more you can take out. If your retirement is all about have cash flow flexibility and living a simpler way of life than this might be a good option for you. There are fees in regards to obtaining either The Reverse Mortgage refinance or purchase but typically you can roll those costs into the loan just like a standard refinance. There is a now $125 fee required by the FHA that is for mandatory financial counseling to help alleviate some of the abuse that occurred years ago in the industry. A reverse mortgage isn’t FREE money.  You or your heirs must pay off the outstanding balance when either you sell or are deceased.  The heirs get the equity position in the house and if the equity has been used up and in what is called a negative position, the property is simply given back to FHA as there is no recourse on the note. The reverse mortgage purchase is what Melanie and I plan on doing when we retire.  We will sell our primary residence and purchase/build a home within a retirement community in the state we plan on retiring in.  At age 62 FHA will require a down payment of 47% of the sales price and this will go down, i.e. the down payment each and every year we wait to retire.  This will enable us to only have to pay the insurance, property taxes, and HOA dues which we estimate to be only ~$750 a month for a brand-new home where no mortgage payments or payoff is required until the last surviving spouse is deceased. Having no mortgage payment will allow us to conceivable have a 2nd home somewhere else, preferably near our children and live as more financial fluid life as we love to travel. If you are interested in learning more about reverse mortgages, simply call Melanie, here in our office(s) as she is a Certified Reverse Mortgage Specialist. And most importantly if your current financial advisor is not talking to you in those meetings, you should be having at least twice a year, about a reverse mortgage as a possible option in your retirement plan this should be a major concern of yours. For more information concerning reverse mortgages please go to: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten
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