Benefits of Reverse
You Are the Owner of Your Home
A common misconception of reverse mortgages is that the lender takes ownership of your home. This is false. You continue to maintain ownership of your home, as long as you comply with the terms of the loan and pay your property taxes and insurance.
You Never Pay a Monthly Mortgage Payment
One of the most attractive benefits of reverse mortgages is that payments are made to you, as long as you live in your home — instead of a traditional mortgage where you make a payment each month.
You Are Protected No Matter What Happens with The Housing Market
The HECM reverse mortgage is insured by the federal government. With federal insurance comes greater security. If the loan ends up amounting to more than the value of the home when sold, HECM mortgage insurance will cover the difference. This means that the loan will be paid in full using only the proceeds your home sells for, and no more.
You May Choose How to Receive and Use Your Money
Each individual senior has different needs. Thus, there are different disbursement options to cover different needs. Unlike receiving a large, lump sum – you only pay interest on the funds you actually need each month for care, thus dramatically slowing down the consumption of equity in the home.
Social Security and Medicare Benefits Are Never Affected
Most government benefit programs that do not test financial resources, such as Social Security and Medicare, are not affected by reverse mortgages.
You are More Protected with Reverse vs. an Equity Line of Credit
A home equity line of credit (HELOC) has traditionally been a pretty common tool to offer additional financial security for homeowners. However, when compared to a reverse line of credit, a HELOC can actually be a risky financial strategy. For starters, HELOCs require a mortgage payment, which eats into your cash flow each month…and given that the FED plans on continuing to raise rates, it will most likely only get worse. Also, HELOCs don’t have any annual interest rate caps AND rates can go up to as high as 18% or more. This can lead to a huge minimum monthly payment in the future that could force you to use debt or deplete a portfolio to afford your lifestyle. Not to mention, banks have you start paying back your HELOC after 10 years, which typically will double your payment. This higher payment can really be a financial struggle for most seniors and being forced to sell your home may be the only solution.
What’s worse, if home values decline, the bank will most likely freeze your line of credit, which will eliminate any financial security you may have had overnight. The only advantage a HELOC has over a reverse line of credit is their low closing costs – but when you look at the risks associated with them, they almost never make sense.
Conversely, a reverse line of credit will never require a mortgage payment, thus freeing up significant cash flow. Also, the interest rate has both annual caps and lifetime caps under 10%, so the consumption of equity stays relatively low. Even though fees can be higher, the fact that the bank will never freeze the line of credit AND the line will grow each year, the reverse line of credit is much safer and a more effective financial tool than a HELOC.
Call 1-800-549-8888 to learn more about our ReverseFLEX loan options
2000 Broadway St.
Redwood City, CA 94063
5170 Golden Foothills Pkwy
El Dorado Hills, CA 95762
2173 Salk Avenue Suite 250
Carlsbad, CA 92008
CA Bur of Real Estate - Real Estate Broker - Broker#01514348.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
Any rates quoted are not guaranteed and are subject to market fluctuations.