The 5 most asked reverse mortgage questions
There’s a lot of information (and misinformation) out there when it comes to The New Reverse Mortgage. Here are the 5 most frequently asked questions.
1. Is it better to wait until I’m older to get a reverse mortgage?
The amount of your reverse mortgage is not based solely on age. Your Available Principal Limit (how much money you can get) is based on a combination of Principal Limit Factor (PLF), age, equity and interest rates. While you won’t get any younger, equity and interest rates do fluctuate, resulting in the potential for a lower APL because HUD can and does adjust the PLF. A downward adjustment means less available funds for you to use in retirement.
2. Will I lose government assistance (Social Security, Medicare) if I get a reverse mortgage?
A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid or Supplemental Security Income (SSI), any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain count as an asset and could impact eligibility. The Retiree’s Equity Line of Credit gives you the flexibility to access the funds when you need them without harming your federal benefits because it is considered loan proceeds and not income.
3. When shouldn’t I get a reverse mortgage?
Before applying for a reverse mortgage, do a cost benefit analysis to help you with the decision. Like all mortgages there are closing costs associated with a reverse mortgage. If you will be leaving your home in 2-3 years a reverse mortgage may not be the right choice for you. If a reverse mortgage won’t result in a significant improvement in your retirement lifestyle it may not be the best solution for you.
4. How much money can I get ?
That amount is determined by your age, equity in your home and interest rates at the time you get your reverse mortgage. During the first 12 months after closing, a borrower cannot access more than 60 percent of the available loan proceeds. In month thirteen, a borrower can access as much or as little of the remaining funds as he or she wishes.
5. What happens if I need more money?
If you choose the fixed rate option, the money is disbursed in a lump sum and there’s no going back for seconds. The Retiree’s Equity Line of Credit Option has a growth feature. After the first month of your HECM loan, the principal limit increases each month thereafter at a rate equal to one-twelfth of the mortgage interest rate in effect at that time, plus one-twelfth of monthly mortgage insurance premium rate. In simpler terms the unused portion of your line of credit will grow at approximately the same interest rate you are being charged on the used portion of your loan.
The New Reverse Mortgage isn’t for everyone…but it could be!
How do I know if The New Reverse Mortgage is right for me?
If you’re still wondering if a Reverse Mortgage is the right solution for you but you’re not ready to sit down with one of our Reverse Mortgage Experts, then we’ll be happy to mail (or email) you Use Your Home to Stay at Home which is the official federally approved consumer booklet for those considering a reverse mortgage.