If you're an aging homeowner planning to stay, a reverse mortgage may be a sensible way to help finance your golden years. This is especially true for older people whose spouses are also over 62 years old and may be listed as co-borrowers of the loan. As Everson mentioned, only older people can legally access reverse mortgages. That's why you'll only see them advertised for older people.
And depending on an older person's situation, it might be a good option for them. Reverse mortgage lenders are required to provide borrowers with a full breakdown of costs in a document known as TALC or total annual cost of the loan. In general, reverse mortgage income does not affect an older person's eligibility for Social Security or Medicare and can be used as the older person wishes. This is free and it's very useful for people to fully understand the benefits and limitations of a reverse mortgage granted by a person without a financial incentive to sell it.
The difference, in short, is that the HECM Saver has lower upfront costs and is better for people looking for a short-term mortgage. He chose to focus on reverse mortgages because, as a baby boomer, he felt he better understood the challenges older people faced when preparing for a 20- to 30-year retirement. They are charged an interest rate but, unlike traditional term mortgages, a monthly payment is not required. It's a no-resource loan, so if the home is worth less than the outstanding balance of the mortgage, there is no residual liability with respect to the inheritance.
However, the CFPB number calculators estimate that this is generally not a good idea due to the interest and fees mentioned above. In most cases, the lower upfront costs of the HECM Saver make it more appropriate for people who want to use the proceeds of a reverse mortgage to pay for long-term care. This is because the rules governing reverse mortgages require a home to be sold if the owner lives outside the home for 12 consecutive months. You may qualify even if you continue to pay a traditional mortgage and the funds can be used at your discretion for whatever purpose you want.
If Betty decides to move out of the house or after her death, the bank will demand the sale of the house and use the proceeds to repay the loan, as well as the fees and interest associated with the reverse mortgage. But generally speaking, reverse mortgage payments aren't counted as income, as long as they're spent the same month they're received. Throughout her mortgage career, Jennifer has helped hundreds of clients solve their financial challenges. Previously available or irrelevant types of reverse mortgages include HECM Standard, Fannie Mae Home Keeper, Jumbo reverse mortgages and HECM for Purchase.
This reverse mortgage is insured by the United States Federal Government and can only be accessed through a lender approved by the Federal Housing Administration (FHA).