Is Reverse Mortgage Good for Arizona Retirees?
If you have equity in your home which is your principal residence, you may not have to sell your home to have a secure financial future. Learn more about benefits of a reverse mortgage and the impact it may have on your estate planning.
A reverse mortgage is an FHA loan program for senior homeowners where the youngest homeowner must be 62 or older. The amount of money that can be withdrawn from your home equity while you continue to live in the home depends upon the ages of the owners, amount of equity in the home and the loan terms. Only your principal residence is eligible for a Reverse Mortgage. This prevents you from purchasing a vacation or winter home with a reverse mortgage loan.
There are many reasons to consider a Reverse Mortgage: 1.) convert untapped home equity into a monthly payment program to supplement retirement income, 2.) refinance an existing loan into a reverse mortgage so you no longer have to make a monthly home loan principal and interest payment (but you still have to pay property taxes, homeowner's insurance, homeowners association fees, utilities and maintenance/repair costs), 3.) draw money out of your home to pay down debt, medical expenses, have a line of credit to draw upon, live your dreams or for other purposes you may have or 4.) any combination of benefits listed above.
The reverse mortgage terms remain unchanged until the original owners move out for more than 12 months or die. At that time the homeowner's estate can repay the reverse mortgage and retain the home or sell the home to repay the reverse mortgage. The homeowner's estate does not have to make up any short fall in repayment of the loan if there is insufficient equity from the sale of the home. The lender would turn to FHA to make up the repayment shortfall - not the estate.
Use of a reverse mortgage to prevent foreclosure: A friend of mine was in loan default and about to lose his home through foreclosure. But by raising some cash required to have the required minimum equity, he was able to qualify for a reverse mortgage to pay off his existing home loan and be guaranteed both he and his wife could live in their home for the rest of their lives without having to make any monthly principal and interest payments.
Other Arizona retirees have purchased new homes with a reverse mortgage so they would not have to make monthly principal and interest payments as long as they both lived in the home.
From an estate planning point of view the down side of a reverse mortgage is the equity in the home is reduced or depleted while the original senior homeowners live in their home until they die.
Wells Fargo is the nation's largest originator of reverse mortgages, but other companies can also. Arizona retirees should take the time to evaluate and decide if reverse mortgages could help them live a full and rewarding retirement.
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Sam Elam, Associate Broker at Berkshire Hathaway HomeServices Arizona Properties transacts homes for sale in the Southeast Valley communities of Chandler, Gilbert, Mesa, Ahwatukee, Tempe and Scottsdale, AZ. Call (480) 213-1799 or Email email@example.com to request additional information or assistance.