Senior Citizens Now Have Several Creative Home Loan Options
New reverse mortgage loan products have hit the market giving people over the age of 55 years of age several options on how home equity can be used to solve a variety of problems both prior and during retirement years.
Here’s some problems and creative solutions that today’s senior citizens face and how a reverse mortgage product can help.
- Can’t qualify to buy a new home. The FHA federally insured HECM R4P, reverse for purchase, is a loan specifically designed for a senior citizen to purchase a home. In a nutshell, the R4P requires a large down payment, typically at least 50% or more, and no payments on the balance of the loan. The property has to be their primary residence.
- Lack of access to tax free funds during retirement. We have all seen the TV commercials that tell you what you can do with a reverse mortgage but did you know that a HECM FHA federally insured line of credit grows over time giving the senior access to greater tax free funds? The unused portion of the line of credit grows every month, no refinancing of the loan is needed to get more funds if you need them. And the lender can never close out the line of credit due to low home values. This line of credit is like no other!
- In need of a lump sum of money but don’t want to refinance the first mortgage. If a senior has an existing first mortgage, it may not make sense to payoff that low rate mortgage and replace it with a higher rate reverse mortgage, but they may be in need of some funds. Now a reverse mortgage 2nd mortgage is available. The 2nd mortgage doesn’t require monthly payments which gives seniors added flexibility. It’s important to note this type of second mortgage is not an FHA federally insured HECM reverse mortgage. However, It is a non recourse loan.
- Likes the reverse mortgage idea but doesn’t want to pay the fees for the loan. As of 2019, new low – cost reverse mortgage options have come to the market. These low cost loans are not FHA federally insured loans, however they are non-recourse loans. Lines of credit and several types of lump sum reverse mortgages are offered with low cost options.
- Cannot afford a divorce. Sadly, the gray divorce numbers are rising. But due to a lack of income, some spouses can not afford to buyout the other spouse. The reverse mortgage is a solution. The spouse buying out the other can qualify for a cash out refinance reverse mortgage easier than a conventional loan and the departing spouse can take their lump sum buyout and use the reverse mortgage R4P to buy a home. The R4P solves problems for both spouses.
- No plan B for retirement funds during down stock market years. We go back to the FHA HECM federally insured line of credit. Studys have shown taking withdrawals out of a retirement portfolio tied to the stock market can drastically shorten the life of your nest egg with seniors possibly running out of money during retirement. The HECM line of credit can be used to draw funds from instead of the nest egg in those down years, giving your nest egg time to recover. Financial planners are starting to embrace the reverse mortgage line of credit for this purpose. New reverse mortgage products are going to continue to come to market and are changing the landscape for retirees giving them options to solve common problems. For information on any of the above options feel free to email me or give me a call by clicking the “contact me” button below my picture at the bottom of the page. Kind regards, Kevin Walton C2 Reverse NMLS 245923 Cell: 805-276-1942