Tag Archives: Reverse Mortgage

What is “FHA Insurance” on a Reverse Mortgage?

You may have heard “federally insured” or “FHA insured” when talking about a reverse mortgage loan, but what does that actually mean? It is actually an integral part of the reverse mortgage and extremely beneficial to the borrowers. 

A federally-insured reverse mortgage assures that, as the borrower, you will receive certain loan payments as agreed upon by the terms of your loan. Also, you or your heirs will never be forced to repay more than your home is worth to pay off the loan, regardless of the loan’s balance.

This is important because it ensures two things – 

  1. The reverse mortgage insurance guarantees that these loan proceeds will be disbursed to the borrower as agreed upon under the loan terms. The loan proceeds are guaranteed even if the lender goes out of business. Similarly, with a line of credit, the lender cannot cancel or freeze the line of credit when this insurance is in place.
  2. The insurance protects all parties in the transaction, including the borrower, the lender, the borrower’s heirs, and the investors who buy the securities backed by the loans. The insurance makes the program possible for borrowers.

“While these [reverse mortgages] got a bad rap in the late 90s and early 2000s, they have changed what needed to change. A reverse mortgage can be an excellent option for qualified borrowers who need to access their home equity and may not have the income or life expectancy to qualify for a traditional first or second mortgage or even a HELOC,” says Eddie Martini, strategic financing and real estate investment advisor at Real Estate Bees, and wealth coach at Martini Legacy.

Like many Americans, you may be concerned about the economy and struggling to manage issues like high inflation and interest rates. At the same time, you may also have enjoyed home price appreciation over the past few years. In Chattanooga, home values have gone up 6.6% over the past year. In Nashville, home values have increased an average of 12.9% over the past year. This home price appreciation has given homeowners significant amounts of home equity to tap into. More home equity, as well as an insured reverse mortgage loan, may be the retirement security you are looking for. And we at Mortgage South want to help you see if a reverse mortgage can help you achieve retirement security. Mortgage South is local and you deal with a professional that has been doing these since their inception. Give Nathan a call, you will not be disappointed even if you find this is not a perfect fit, he can point you in a direction that might help. If you are in Chattanooga or the surrounding area, please call (423) 624-3878. If you are in the Greater Nashville area, please call (615) 657-5878. 

 

Inflation Graphic

How Inflation is affecting seniors and how a Reverse Mortgage could help

Inflation soared in 2022. According to the U.S. Bureau of Labor Statistics, inflation is around 7% at the start of 2023, but it still towers over consumer prices from just a few years ago. As Coin News’ U.S. Inflation Calculator highlights, inflation rates stood at a mere 1.4% in 2020 and crouched around 0.7% in 2015. Overall, the inflation rate appears to be creeping downward, but it has a long way to go before it falls back to recent norms.

How is inflation affecting seniors? Nearly 90% of seniors think the United States is experiencing a retirement savings crisis (According to an AAG study). While most Americans probably consider inflation in the short term when they go to the grocery store to buy food or fill up their vehicle with fuel, over time inflation can seriously devalue your savings and income. Understanding how inflation may hurt your retirement strategy is a must for ensuring that you have enough assets to last through your later years. 

Let’s look at how retirees pay for expenses when they’re no longer working. While many seniors rely on Social Security, which will provide the majority of retiree income, they will likely need more income. Not all sources of income are the same, and some provide better protection against inflation compared to others. This leaves many seniors with a few choices: continue to work, sell off stocks, make extra withdrawals from retirement accounts, or use their largest asset – their home. 

According to Shelley Giordano, the Chair of the Funding Longevity Task Force, a coalition of retirement and housing thought-leaders, “more retirees could benefit from accessing home equity strategically through the use of a reverse mortgage.” If you are 62 or older, own your home, and have paid off the mortgage or are close to paying it off, you’ll have accumulated equity in the property. This means you could do a reverse mortgage and tap into that home equity. 

You also have options to purchase a new home with a reverse mortgage. There is a “Home Equity Conversion Mortgage (HECM) for Purchase” loan that allows people 62 and older to purchase a new principal residence with HECM loan proceeds. If you are in an area where housing prices are on the rise, you might be able to sell your home and move to an area that is less expensive. Or, for those who want to remain in their same town, a smaller home might help reduce expenses. 

There are many uses for a reverse mortgage. Some include creating more cash flow for paying every day expenses, paying off high-interest credit card debt, more cash flow to invest in the retirement lifestyle you desire, investing in home improvements to make your home safer, and/or building a medical financial plan in case you need long-term healthcare. And we at Mortgage South want to help you see if a reverse mortgage can help you achieve retirement security. Mortgage South is local and you deal with a professional that has been doing these since their inception. Give Nathan a call, you will not be disappointed even if you find this is not a perfect fit, he can point you in a direction that might help. (423) 624-3878.