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What is a Reverse Mortgage?
Unlike a traditional home equity loan, such as an FHA or refinance loan that you begin paying back soon after your loan closes, a HECM doesn’t have to be repaid until you leave your home.* In addition to having no monthly mortgage payments, you will receive tax-free proceeds from your HECM loan, and you can designate how you want to receive them. HECM loans were specifically designed to help those 62 and older supplement their retirement.
*You must continue to maintain your property. pay property taxes and homeowners insurance, and otherwise comply with all loan terms.
It’s specifically designed to help those 62 or older leverage the equity in their home and utilize it for their financial benefit.
Who is eligible for a reverse mortgage?
- All borrowers must be at least 62 years of age (depending on loan program)
- Must have sufficient equity (50%+)
- Must pass financial assessment*
- Must be primary residence- no second homes, vacation homes, etc. (6+ months of the year)
- All borrowers must attend reverse mortgage counseling
* Some credit-challenged homeowners may still be approved if they are able to set up a mandatory escrow account to use the reverse mortgage to pay their property taxes and insurance for them (aka a Life Expectancy Set-Aside or LESA)
Let’s talk advantages of a reverse mortgage:
Homeowners are able to leverage a better retirement with the use of a HECM Loan. With a HECM you still remain the owner of the home, which folks often believe to be a myth-it’s not! You can remain in your residence for as long as you would like without having to pay a monthly mortgage payment (*In addition to maintaining your property, you must continue to pay property taxes, homeowners insurance, HOA fees, and otherwise comply with all loan terms. The home equity you access is tax-free and you can utilize it in a multitude of ways. You also have the security of knowing that a HECM loan is federally insured.)
Now let’s talk strategy. Depending on your situation you may obtain a HECM for the following reasons:
- Pay off existing mortgage (this is a requirement of the loan itself)
- Complete home renovations
- Allow retirement savings time to grow
- Build stronger savings, and feel at peace in case of emergency
- Have more cash flow
- Purchase a home that better fits your needs (yes, you can use an HECM loan for purchase)
- Pay off debt, like high interest credit cards (while simultaneously lowering your monthly bills)
There are plenty of benefits to a Reverse Mortgage and effective strategies that allow you to place yourself in a great spot for retirement.
Used wisely, a reverse mortgage can mean fewer funds being relied upon from investments and other retirement instruments. Reverse mortgages are a tool to put home equity to work for homeowners during retirement.
At Geneva, we take pride in having Certified Reverse Mortgage Professionals®able to assist you and guide you through the right strategy for you.
Reach out to us today to see how you could benefit from a reverse mortgage.
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