Thursday, April 24, 2008

Putting the Brakes on Retirement Budget Crunch: The Reverse Mortgage

There is a resource out there for retirees that can improve financial security and improve your quality of life…..

Sometimes the Golden Years aren’t as bright as you had hoped. It should be a time for you to spend time with family, do the things you never had time to do and always wanted to, and enjoy life in general. But many people face financial challenges at this point in their lives. Perhaps your retirement plan didn’t pan out (any Enron victims out there?). Or, maybe the recent cost of living increases weren’t originally in your budget plan. If this scenario sounds familiar, than a reverse mortgage maybe an option to consider.

What is a reverse mortgage? It’s a Home Equity Conversion Mortgage, also known as a HECM (pronounced “heck-um” by all us mortgage people). It is a government insured program that allows a person of age 62 years or older access to monthly cash by tapping into the existing equity in their home.

There are different HECM products out there, but there are some features and safeguards you should seek if you are considering this move. Make sure that the program you are considering allows you to retain title to your home. Also, the loan should be non-recourse, or in other words, you should never owe more than your house is worth. The loan should not have to be repaid until you permanently leave or sell the home. And also, you should be asked to take a counseling class (conducted by someone other than a HECM lender) to ensure you understand the terms of the mortgage. And before you make that final decision, talk to your kids, your attorney or someone who cares about you and whom you trust. Don’t take the plunge until you’re certain this plan will work to your advantage.

A HECM is designed to deliver increased tax-free monthly income to most people (double check this point with your financial counselor) and eliminate monthly mortgage payments. So, it’s different from just your basic home equity line of credit. There is also no income limitation to fret about. The amount of money you can receive depends on things such as your age, how much your home is worth, the current market rates and which HECM product you pick. In general, the older you are and the more your home is worth, the more money could be available to you. Most HECM’s have costs similar to a regular mortgage, but make sure you do your homework. You can get a conventional or an FHA HECM. Your mortgage counselor will help you figure out which best fits your needs.

For many people, a reverse mortgage makes a lot of sense. It can allow you to live in your current home more comfortably, and still do those things you’ve always wanted to do. So, maybe taking the grandkids to Disney isn’t out of reach. Or skydiving lessons can still be a consideration. Or maybe you just need a new roof on the house. If you aren’t living the life you deserve or expected, you owe it to yourself to see if this option works for you. Talk to your kids, advisors or friends and see what they think. And if the stars align, maybe you should reverse the direction of your retirement budget.

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at Home Loans Plain Talk.

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