Are you considering a reverse mortgage but have no idea if it's right for you?

Are reverse mortgages safe? Well, as long as all loan terms are met, the FHA (Federal Housing Administration) guarantees no repayment of the loan until the last borrower moves out, sells, or passes away.

-Foundation for Financial Wellness

Video Transcript

Alright, let’s dive headfirst into the nuts and bolts of reverse mortgages at this point. Fair warning, there are a lot of details here, so if you’re a notetaker, you might want to get a pen and paper ready and don’t be afraid to hit “pause” as you do that. We’re going to hit on a bunch of topics here.

So, some projected changes on the horizon:

• 10,000 people a day hitting 62 years old for the next 20 years.
• 3,000 of them are still making a mortgage payment.
• At 62, 84% will be in jeopardy of running out of money.
• At 66, 50% would still be likely to run out of money.
• Lower savings rates with less retirement preparation is a reality.
• There’s fewer pensions and defined benefit plans.
• We go through ebbs and flows and oftentimes have a greater need for security and certainty is higher than ever before especially with us living longer, which causes concern about outliving our money.

So, some reverse mortgage basics:

• You must be age 62 or older.
• FHA-qualified home
• You must live in the home more than six months a year.
• Generally it won’t affect Social Security or your Medicare benefits. There’s some nuances there, so be sure to speak to a professional.

Some reverse mortgage benefits:

• You keep the title to your home.
• Basic credit, income, and property qualifications.
• Loan proceeds from equity very between 30 to 74% are usually income tax free.
• No mortgage payments during the loan term. Your mortgage payments go away if you still making them. You’re still responsible for maintenance of the home and the payment of taxes and insurance, but you must stay in the home.

Let's talk about like are reverse mortgages safe.

• Well, as long as all loan terms are met, the FHA (Federal Housing Administration) guarantees no repayment of the loan until the last borrower moves out, sells, or passes away.
• When you move out of your home, you or your estate have up to 12 months to repay the loan, sell the home.
• No penalty for early payment (may vary in some states, but generally speaking).
• This loan is a nonrecourse loan. If the balance on the loan exceeds the home value, HUD/FHA makes up the difference! • After costs of sale and loan is paid off, heirs of estate keep excess proceeds from the sale of the home, if any.

So, a quick review for you. Do you have any decisions to make or actions to take?

Considering a reverse mortgage might make sense for you, and if it does, then find someone you trust to go through it thoroughly with you. There are a lot of moving parts to these things and having a trusted resource to lean on really is priceless.

As always, don’t forget. You can take advantage of your private counseling through the foundation. It’s included, it’s private and confidential, and it’s always with one of our Certified Financial Wellness Counselors. To schedule that counseling session, simply click on the "Request Counseling" button.