What to Do When Social Security Is Not Enough to Live On
What to Do When Social Security Is Not Enough to Live On Social Security provides a crucial source of income for millions of Americans during their retirement years. However, for many individuals, especially those with limited savings or high medical expenses, relying solely on Social Security benefits may not be enough to cover their basic needs. If you find yourself in this situation, here are some steps you can take to improve your financial situation and ensure a more comfortable retirement. 1. Assess your expenses: Start by analyzing your monthly expenses and identify areas where you can cut back. Creating a budget can help you prioritize your needs and make necessary adjustments. 2. Explore part-time work: Consider taking up part-time employment to supplement your Social Security income. This can provide additional income and keep you engaged in a meaningful activity. 3. Maximize other income sources: Look into other potential sources of income, such as pensions, investments, or rental properties. Diversifying your income streams can help mitigate the impact of an inadequate Social Security benefit. 4. Downsize your living arrangements: If housing costs are a significant portion of your expenses, downsizing to a smaller, more affordable home can help reduce your monthly expenses and free up funds for other necessities. 5. Utilize government assistance programs: Investigate whether you qualify for any government assistance programs, such as Medicaid or Supplemental Nutrition Assistance Program (SNAP). These programs can provide additional support for healthcare and food expenses. 6. Cut unnecessary expenses: Evaluate your discretionary spending and eliminate any unnecessary expenses. This might include cable TV subscriptions, dining out, or non-essential subscriptions. 7. Consider relocating: Moving to a more affordable area can significantly reduce your overall cost of living. Research different regions to find places with lower housing costs, taxes, and healthcare expenses. 8. Access home equity: If you own a home, consider exploring options to tap into your home equity. This could involve downsizing, taking out a reverse mortgage, or renting out a portion of your property. 9. Seek financial advice: Consult with a financial advisor who specializes in retirement planning to help you navigate your financial situation. They can provide guidance tailored to your specific circumstances and help you make informed decisions. 10. Explore part-time entrepreneurship: If you have a skill or passion, consider turning it into a small business or offering freelance services. This can not only supplement your income but also provide a sense of fulfillment. 11. Evaluate your healthcare costs: Medical expenses can be a significant burden for retirees. Research different healthcare insurance options and ensure you are taking advantage of all available benefits, such as Medicare or Medicaid. 12. Take advantage of senior discounts: Many businesses offer discounts for seniors, ranging from restaurants to travel. Take advantage of these discounts to stretch your dollars further. 13. Join a community organization: Engaging with local community organizations can provide access to resources and support networks. These organizations often offer services and programs specifically designed for seniors. 14. Prioritize self-care: Taking care of your physical and mental well-being is crucial during this phase of life. Focus on maintaining a healthy lifestyle, managing stress, and seeking support when needed. Common Questions: 1. Can I work while receiving Social Security benefits?Yes, you can work while receiving Social Security benefits. However, if you haven’t reached your full retirement age, there are limits on how much you can earn before your benefits are reduced. Once you reach full retirement age, you can work and earn as much as you want without any reduction in your benefits. 2. Can I receive other benefits while receiving Social Security?Yes, you may be eligible for other benefits such as Medicaid, SNAP, or low-income housing assistance. Contact your local social services agency to determine your eligibility for additional support. 3. What is a reverse mortgage, and how does it work?A reverse mortgage allows homeowners aged 62 and older to convert a portion of their home equity into cash. This loan does not require monthly mortgage payments and is repaid when the homeowner sells the property or passes away. 4. How can I find affordable healthcare insurance options?Visit the official Medicare website (medicare.gov) to learn about available healthcare insurance options for seniors. Additionally, your state’s health insurance marketplace can provide information on subsidized plans based on your income. 5. Are there any resources available for job placement or career change assistance?Yes, many organizations provide job placement and career change assistance specifically targeted at seniors. One such program is the Senior Community Service Employment Program (SCSEP) funded through the U.S. Department of Labor. 6. Can I start a small business while receiving Social Security benefits?Yes, you can start a small business while receiving Social Security benefits. However, you must report your income accurately and ensure it does not exceed the allowable earnings limit. 7. How can I find affordable housing options?Contact your local housing authority or nonprofit organizations specializing in affordable housing to explore available options. Additionally, websites like housingmaps.com can help you locate affordable rentals in your area. 8. Are there any tax breaks or credits available for seniors?Yes, seniors may qualify for various tax breaks and credits. Consult with a tax professional or use tax software to ensure you are taking advantage of all available deductions and credits. 9. Can I receive Social Security benefits from a deceased spouse?Yes, as a surviving spouse, you may be eligible to receive survivor benefits based on your deceased spouse’s work record. Contact the Social Security Administration for more information. 10. Can I receive Social Security benefits while living abroad?In most cases, yes. However, there are specific rules and restrictions for receiving Social Security benefits while living abroad. It is advisable to contact the Social Security Administration to understand the implications and requirements. 11. Are there any educational opportunities or scholarships for seniors?Yes, many colleges and universities offer educational opportunities and scholarships specifically for seniors. Contact local educational institutions to inquire about available programs. 12. Can I receive Social Security benefits if I am
Homeowner’s Insurance Premiums are Surging in These Five States
American homeowners, especially older ones, are being crushed by record increases in homeowners insurance premiums. Money.com reports these five states saw the largest increase in premiums from May 2021 to May 2023. The spike in premiums is attributed to a perfect storm of a spike in natural disasters, record insurance losses, and higher construction prices. Natural disasters such as wildfires have long-lasting impacts. For example, in the wake of New Mexico’s most destructive wildfires insurers began hiking homeowners insurance premiums. The same can be said for Colorado, Idaho, and California. In the wake of the disastrous and deadly Maui Fire island residents will soon face the same challenge. As a result of the surging cost of premiums, many older homeowners without a mortgage on their home have chosen to forego homeowners insurance altogether. The Insurance Information Institute reports that 5% more homeowners have not purchased homeowners insurance than just two years ago. Such homeowners are very likely house-rich but cash-poor. Even worse, their greatest source of wealth is now at risk of being wiped out. One disaster could push an older homeowner into complete financial ruin or possible homelessness. Reverse mortgage professionals who originate in states with marked premium increases should reach out to their local property and casualty insurance agents. Ask if they’ve seen an increase in homeowners insurance policy cancelations. If the agent has noted an increase of clients opting out of insuring their home you can explain that reverse mortgage could provide the means needed to purchase a policy and protect what’s likely their largest asset. Working with an agent While the insurance agent cannot divulge the identity of homeowners who’ve canceled their policy, they can make contact and recommend the homeowners arrange a meeting to learn how a reverse mortgage could help get them insured again. This is a potential win-win-win scenario. The homeowner wins by protecting their home. The insurance agent wins back a client. The originator wins a sale but most importantly, helps eliminate the risk of a homeowner losing their home to a disaster or fire. by Shannon Hicks September 19, 2023
How a HECM could save uninsured homeowners from disaster
The casino is a suitable place to roll the dice and take your chances- win or lose. However, gambling with the security of your largest asset and risking the roof over your head is not. Survey reveals more homeowners are uninsured The Insurance Information Institute reports that 5% more homeowners have not purchased homeowners insurance than just two years ago. That’s not surprising considering skyrocketing premiums in several states, most notably California and Florida. Are most of these homeowners well off with substantial assets to self-insure their homes? Not necessarily. The Institute’s survey showed that half of those who chose to forego insurance on their home have an annual income below $40,000. While wealthy individuals may have the ability to self-insure, most Americans pool their risk with an insurance company that has the financial capacity to absorb the expense of repairing or rebuilding a home. A risky gamble As we know, if you have a mortgage on your home you are required to carry a homeowners insurance policy. The lender must protect the collateral that secures the loan. In a recent column in TheMessenger.com David Stevens, a former head of the Federal Housing Administration and the Mortgage Bankers Association said the Insurance Information Institute ‘survey suggests many of these homeowners may be retirees with a paid-off home who are living on a fixed income. The role of inflation Inflation is…likely influencing the decision for these homeowners to forgo homeowners insurance. Stevens said, “For some people who are living on a fixed income, who have seen the prices of necessities like food and energy go up significantly in the last two years, it’s one they might have to make, however reluctantly”. Insurify, an online insurance marketplace, projects the average cost of home insurance will be $1,784 this year, 17% more than in 2021. Residents of some states are getting charged more than three times that, it said. Homeowners living on a fixed income who cannot afford homeowners insurance are also at risk of falling behind on their property taxes. Stevens noted, “As long as you don’t have a mortgage on your house, you won’t get kicked out if you don’t pay for home insurance, but you will get kicked out if you don’t pay your property taxes”. How a HECM can save the home How could a reverse mortgage literally help save the home these at-risk individuals live in? Let’s do the math. Let’s say a couple has a home worth $300,000 that’s been fully paid off but they cannot afford homeowners insurance. Should they lose their home to a natural disaster or fire they could easily find themselves homeless not having the money to rebuild. However, utilizing a reverse mortgage this couple could take out an annual withdrawal from a Home Equity Conversion Mortgage’s available credit line (or principal limit) to pay the annual premiums. This strategy would give them peace of mind and most importantly protect them from becoming permanently unhoused. Of course, the reverse mortgage’s initial closing costs, FHA insurance premiums, and accrued interest would add to the loan’s balance but they’ve succeeded in protecting what is likely their largest asset and may help ensure the home remains for their heirs to inherit. “At lower income levels, homeowners’ insurance may be perceived as a discretionary purchase,” the Insurance Information Institute said in a report about its survey. “Weather does not discriminate by income, and low-income homeowners remain at risk… Logic would suggest that only a small proportion of low-income homeowners could withstand the total loss of their home from an unforeseen weather event without insurance coverage”, said Robert Dietz, chief economist at the National Association of Home Builders. Conclusion If you originate reverse mortgages in Florida, California, or any state where homeowners insurance premiums have skyrocketed you may want to consider marketing to this at-risk group. After all, a reverse mortgage could literally save the roof over their head. by Shannon Hicks September 4, 2023
Silver Divorce
You might be going through, or considering, a separation or divorce but the end of a relationship does not necessarily mean that you will have to sell your home. Your home may be able to give both partners a new start. For many, their home is their largest asset and where most of their net worth has accumulated. There are mortgage products available that can allow you to buy out the other party while enabling you to stay in your home. A divorce or separation doesn’t always mean you will have to sell your property. You will require a finalized separation or divorce agreement, as that is required by the lender and the agreement needs to clearly detail the asset allocation and any joint debts that need to be cleared. The mortgage funds can only be used to buyout the other party’s equity the home unless it is clearly laid out in the separation agreement that some joint debts need to be paid out to a maximum of 95% of the value of the property. The property must be your primary residence. Sometimes friends or siblings have bought a home and live together in the property. This program may be used in that circumstance also, but this will require an exception for an approval by the mortgage insurer. There are insured mortgage programs available that could help you stay in your home in the event of a separation, divorce or dissolution of a relationship by purchasing the home from your ex-spouse or partner for up to 95% of the home’s value. To qualify for this program you must be able to afford the mortgage payment on your own along with your other liabilities. Not only must the lender approve your application but also a mortgage insurer. Both parties must also be on title on the home prior to the separation. There are some differences between two of the programs. With the first mortgage insurer, the funds can only be used for a spousal buy-out or the dissolution of a relationship. This could be friends, relatives, etc. There cannot be any matrimonial debts or pre-payment penalties or fees included in the new financing. With the other mortgage insurer, the funds can only be used for a spousal buy-out and no other relationship breakdown but the new financing can include matrimonial debts if they are listed on the separation or divorce agreement. They will also allow pre-payment penalties and fees to be included. To qualify for both of these programs you must have good credit and earn sufficient income to support the mortgage payments. It’s so important to seek the advice of a mortgage broker very early in the process, as they can guide you along the way to a successful separation so you can both have the best possible outcome going forward. If you already have a separation agreement in place, they can show you how the value in your home can make it work out for you both. If you have any questions on this program, please give me a call at 1-941-624-4804 or email me at todd@homeforlifefl.com
5 Sources of Retirement Income You Probably Haven’t Considered Yet
If your retirement budget is feeling tight, consider these extra income sources. Planning for retirement can involve a lot of number crunching and strategy to ensure you’ll have enough money to live the life you want. While most people think of their investment accounts and Social Security as their main sources of retirement income, you may have quite a few other options available to you to help make sure you get to live your golden years in style. Here are five sources of retirement income you probably haven’t considered yet. 1. Home equity If you own your home outright, it may be a viable source for additional income in retirement. You could simply sell your home, downsizing to a smaller house. Doing so would give you access to a portion of the equity previously stuck in your home. You could spend the proceeds immediately or invest it for the future. Another option is to stay in your home and refinance. You may use a cash-out refinance to tap the equity in your home. The drawback of a cash-out refi is that you’ll now have a monthly mortgage payment to make. If that isn’t in your retirement budget, you may want to consider another option. A reverse mortgage is a home loan that uses the equity in your house, but it doesn’t need to be repaid with monthly installments. Instead, the mortgage company will recoup its loan when the property is sold. There are several ways to structure a reverse mortgage, and you could receive monthly income from your home. The biggest drawbacks of a reverse mortgage are that the interest rate is variable and they can have hefty up-front costs. 2. Annuities If you can lock in a great interest rate on a fixed annuity, it might be worth exploring the option for retirement. An annuity is a contract with an insurance company that will pay out a certain amount of money to you on a regular basis for the life of the contract. You can buy a lifetime annuity that will pay you every month until you pass away. That said, there are a lot of pitfalls with annuities. Some have hefty upfront costs and charge high ongoing fees. Be sure to understand the rate of return you’ll get on your money in the annuity and make sure the benefits outweigh the costs. 3. Health savings accounts You may have some money lying around in a health savings account that could be used as a source of retirement income. A health savings account, or HSA, is a special tax-advantaged account designed to help people with high-deductible health insurance plans pay for medical care. Employers will often help fund the account as part of their company-sponsored insurance benefit. There’s a tax benefit to using your HSA funds to pay for qualified medical expenses. However, the great thing about an HSA is that when you turn 65, you can use the funds for anything. The only catch is that you’ll have to pay income tax on the distributions. If you have an HSA and you don’t have a lot of medical expenses, you can look into investing the money in the account with the goal of saving it for retirement. If a medical emergency comes up along the way, you can always tap those funds early. 4. Rental income When people think of rental income, they think of owning a duplex or apartment building and renting it out. But you can generate rental income a lot of different ways these days. You’ll probably be driving a lot less in retirement. Maybe you only need one car most of the time. You can rent out a car on Turo. Maybe you’ll be going on vacation more often and for longer. You can rent out your home on Airbnb while you’re on vacation. Maybe you have some great period furniture that you’ve held onto throughout the years. You can rent it to staging companies (for home sales) or rent it as set dressing. You can rent just about anything you own these days and generate some income. 5. Part-time employment or a passion project You may surprise yourself and find you have a job in your retirement. A lot of retirees take on part-time employment in a low-stress environment. Not only does it provide a nice source of income, it can fill the days with meaning and activity. Others pursue a passion project in retirement. And after a few years, they start generating meaningful income from that project. Working in retirement can provide health and financial benefits, but be sure you understand how working in retirement will impact the rest of your finances and your overall retirement plans as well. Supplement your retirement If you think you might have to cut something from your retirement budget, be sure to review the above list for opportunities to supplement your income. Social Security and investments may only take you so far, so be sure to take advantage of any other resources you have at your disposal to achieve the best retirement for you. By Adam Levy– Sep 4, 2023
Reverse mortgage requirements
Key takeaways Reverse mortgages are a way for older Americans to access the equity in their homes and use it to fund retirement while still allowing them to live in the home. Such a mortgage pays the homeowner each month out of the home’s equity rather than the homeowner paying money to the lender. However, reverse mortgages can be complex, and there are strict rules and guidelines dictating who qualifies for these mortgages. These rules also dictate how much income a reverse mortgage can provide and how much they cost. It’s important to understand reverse mortgage requirements and rules if you’re considering this financial option. Reverse mortgage requirements There are a variety of requirements and eligibility guidelines to meet to qualify for a reverse mortgage. Reverse mortgage age limit First and foremost, the homeowner must be 62 or older. This is true for government-sponsored home equity conversion mortgages (HECM) and most private reverse mortgages. However, a small number of lenders may offer options for people as young as 55. Other reverse mortgage qualifications Beyond the age requirements, for reverse mortgages, you must meet the following additional requirements. The home you’re seeking a reverse mortgage on must be your primary residence. That means it must be the address where you spend most of the calendar year. Other reverse mortgage requirements are that your house must be in good shape, and you must participate in counseling that’s provided by a HUD-approved reverse mortgage counseling agency. During the counseling session, an agent will review your eligibility for a reverse mortgage and also discuss the financial ramifications. For instance, those who take out a reverse mortgage loan when they’re too young risk running out of money later in life, during a time when it’s likely income will be lower and healthcare bills may be steeper. Alternatives to reverse mortgages for those that don’t qualify If you’re looking to turn your home equity into funds but can’t qualify for a reverse mortgage due to age or other restrictions, consider some of the following options: Reverse mortgage requirement FAQs Mia Taylor Fri, September 1, 2023
Americans are raiding their 401(k)s
The data is in! More Americans are raiding their 401(k) accounts because of financial difficulties reports CNN. The most recent report from Bank of America released last Tuesday reveals that hardship withdrawals from 401(k)s increased 36% in Q1 of this year when compared to Q2 of 2022. The data was drawn from Bank of America’s analysis of their client’s employee benefits program which includes over 4 million plan participants. Hardship Withdrawals Hardship withdrawals can be taken for a variety of reasons including, purchasing a home, paying for educational expenses, and medical costs, or avoiding foreclosure or eviction to name a few. The IRS defines a retirement plan hardship withdrawal as, a “distribution from a participant’s elective deferral account made because of an immediate and heavy financial need, and limited to the amount necessary to satisfy that financial need. The money is taxed to the participant and is not paid back to the borrower’s account.” Keep in mind that not all 401(k) plans include a hardship withdrawal provision. Even worse, these withdrawals cannot be repaid like a loan which means the plan participant has permanently reduced their account’s earning potential. In part, hardship withdrawals are likely being fueled by inflation. As the cost of living surges consumers may opt to charge everyday expenses they once paid in cash. The New York Federal Reserve data shows that since 2019 overall household debt holdings have increased by $3 trillion while credit card debt exceeded $1 trillion for the first time! A future retirement crisis for younger workers Consequently, younger workers are likely to find themselves cash poor and hopefully house rich by the time they reach their 60s. But what about older Americans? Many have increased their systematic withdrawals from retirement savings to deal with the effects of inflation which substantially decreases the duration of their sustainable withdrawals- or how long that money will last. Others have chosen to work longer continuing to save and hoping the markets will be kind to their portfolio. Accessing untapped home equity is not guaranteed While this financial drama plays out millions of older Americans are sitting on, more precisely living in a substantial sum of home equity. Why do so few choose to even consider a reverse mortgage? One reason is many homeowners believe they will be able to tap into their home equity in the future should they need to. However, that strategy is risky at best. Lenders and banks routinely tighten their credit to consumers when economic conditions are uncertain or negative. Imagine the frustration when they learn that the value of their home is stuck in the bricks and mortar of their house unless they choose to sell. And despite what history has taught us most homeowners conveniently forget that their home’s value could drop, even significantly. How much of their home’s equity would be left then? Facing the hard truth So what can reverse mortgage professionals do? One is to understand the basic mechanics of retirement such as sustainable withdrawals, the distribution phase, required minimum distributions, and common pension benefits for surviving partners. Another key takeaway is to broach the question of how long their money will likely last. Some simple math can tell you roughly how long their current monthly distributions are sustainable. You certainly don’t want to give financial advice, but you also don’t want to ignore the elephant in the room. Even better, partner with financial professionals in your market who know these metrics better than anyone and who are well-versed in approaching these sensitive discussions. There’s no denying that Americans’ retirement is in disarray. The question is when will their largest asset be considered as a potential source of much-needed cash flow? by Shannon Hicks August 21, 2023
Some Extra Potential Sources of Retirement CashYou may have several sources of cash available to you for retirement that you had not considered, although using them to fund your retirement should be done only after careful consideration.
One such source is your home. One approach for retirees traditionally has been selling their homes and moving into a smaller home, then pocketing the difference. However, a slow housing market has hurt the ability of many seniors to tap their home equity in this manner. An alternative is reverse mortgages. They allow homeowners to tap home equity even if they can’t sell their home. With a reverse mortgage, a homeowner (usually 62 or older) borrows against the equity in the home and receives regular payments. Those payments are tax-free, just as the proceeds from any type of loan are not subject to income tax. Although a reverse mortgage is a loan, you are not required to repay anything until you sell or vacate the home. You must remain current on your tax and insurance payments, though. When a reverse mortgage borrower sells the house or dies, the lender will be repaid, plus interest. Typically, repayment will come from the sales proceeds. Reverse mortgages have upfront costs, paid by the borrower. Therefore, borrowers should intend to stay in the house for a while, after getting a reverse mortgage, to justify paying the initial charges. Another potential source of cash is a life insurance policy you no longer need. Perhaps your kids are finished with school and living independently. You might not want to keep paying steep premiums every year. One possibility is to surrender your policy. If it has cash value, you may wind up with some money. Another option is to sell your policy. This type of transaction is called a life settlement. Institutional investors buy pools of such policies and keep paying the premiums while awaiting a payoff. In some situations, you might get more from a sale than from a policy surrender: * You must have a severe health condition. Investors often buy from elderly individuals so a sale might work for your parents. * You must have the right kind of insurance policy. Buyers prefer universal life policies because they permit reductions in premium payments. Term life policies that can be converted to universal life also may be sought by buyers.
Reverse mortgages have garnered considerable attention over recent years, especially among homeowners above the age of 62. This form of financial assistance allows them to tap into their home’s equity, providing a much-needed income source during their retirement years. However, obtaining a reverse mortgage is not as simple as it may seem, and it involves several critical steps. This article explores these necessary steps to guide potential borrowers through the process.
Research and Understand What Reverse Mortgages Entail Before starting the process, it’s crucial to understand what a reverse mortgaga is. In essence, it is a loan available to homeowners who are 62 years or older, allowing them to convert part of their home’s equity into cash. Unlike a conventional mortgage, the borrower isn’t required to make regular monthly payments to repay the loan. Instead, the loan is repaid when the borrower no longer occupies the home as their primary residence, generally through selling the home. Despite the apparent advantages, reverse mortgages also come with potential risks and downsides, such as high upfront costs, decreasing the estate’s value left to heirs, and the possibility of losing the home if certain conditions aren’t met. Evaluate Your Eligibility Once you’ve understood the concept of a reverse mortgage, it’s essential to evaluate whether you’re eligible. Generally, to qualify for a reverse mortgage, you must: Counseling Session Prospective borrowers are required to undergo a counseling session with a government-approved agency. This step, mandated by the Federal Housing Administration (FHA), ensures that the homeowner fully comprehends the implications of a reverse mortgage, its costs, and its alternatives. Choosing a Reverse Mortgage There are three types of reverse mortgages: Home Equity Conversion Mortgages (HECMs), proprietary reverse mortgages, and single-purpose reverse mortgages. Each type serves different needs and comes with distinct rules and costs. HECMs are federally insured and backed by the U.S. Department of Housing and Urban Development (HUD). In contrast, proprietary reverse mortgages are private loans, and single-purpose reverse mortgages are offered by some state and local government agencies and non-profit organizations. Application Once you’ve decided on the type of reverse mortgage, the next step is to apply. The process typically involves providing information about yourself and your home. You’ll need to present some documents, such as proof of age, evidence of homeownership, and information on any existing mortgage loans on your property. Home Appraisal After applying, an appraisal will be done on your home to determine its market value. This value, along with your age and current interest rates, will be used to calculate the amount of money you can borrow. Underwriting Once the appraisal is complete, your application will be processed and underwritten. During this stage, the lender will verify your information, review the appraisal, and check if you meet all the necessary requirements. Loan Closing If your application is approved, you’ll move forward to the closing process. The loan closing involves signing the final documents and paying any closing costs or fees. Disbursement of Funds Once the loan is closed, you’ll have three business days to cancel the loan if you change your mind, a period known as the “right of rescission.” After this period, the funds from the reverse mortgage can be disbursed. Ongoing Responsibilities Securing a reverse mortgage also comes with ongoing responsibilities. These include living in the home as your primary residence, keeping the home in good condition, and continuing to pay property taxes and homeowner’s insurance. Failing to meet these requirements can lead to the loan becoming due and payable. In conclusion, while a reverse mortgage can provide much-needed financial relief, it is a complex financial product with significant implications. By understanding these necessary steps, potential borrowers can approach the process with confidence and make informed decisions. It’s also recommended to seek advice from a trusted financial advisor to determine if a reverse mortgage is the right option for your financial situation. By Catherine Tims | August 6, 2023
How a Reverse Mortgage Can Be Used to Purchase a Home
Reverse mortgages have traditionally been used as a way for older homeowners to access the equity in their home and receive regular payments, either as a lump sum, tenure or term payment, or through a line of credit, all without having to sell their property or make monthly mortgage payments. * But what if your client wants to sell their home and purchase a new one? Can a reverse mortgage be used for that? In short, yes, but let’s take a deeper look into how a reverse mortgage can be used to purchase a home. The Reverse Mortgage Purchase Process In a reverse mortgage purchase, the homeowner can use the proceeds from the sale of their existing home for the down payment on the new home. This, coupled with the reverse mortgage, can cover the purchase cost of the new home, allowing the borrower to keep more funds on hand. Plus, the borrower gets all the usual benefits of a reverse mortgage, including no required monthly mortgage payment.* With a reverse mortgage for purchase, selling the existing property and buying a new home can be done simultaneously. This type of reverse mortgage can be an attractive option for seniors who want to right-size or relocate and want to maintain a healthy cash flow. Qualifying for a Reverse Mortgage for Purchase To qualify for a reverse mortgage for purchase, there are some important considerations to keep in mind. Firstly, the homeowner must have sufficient equity in their current home or liquid assets to pay off any outstanding mortgage debt and provide a down payment for the new home. Secondly, the new home must meet the requirements for a reverse mortgage, including being the borrower’s primary residence, meeting FHA or product specific guidelines, and being an eligible property, such as a single-family home or approved condominium. Additionally, the borrower must meet the reverse mortgage requirements, including being age eligible and meeting a financial assessment. Conclusion In conclusion, a reverse mortgage can be used to purchase a home and can be a good option for senior homeowners who are interested in rightsizing or relocating. It can help them keep money in savings by using the sale proceeds as a down payment and letting the reverse mortgage cover the rest of the purchase. It comes with the same benefits that a reverse mortgage typically has, including being a non-recourse loan and having no required monthly mortgage payment.* A reverse mortgage for purchase takes some additional planning and consideration to ensure it is the right fit for the borrower, but it can be well worth it in the end. We recommend your clients speak with their financial advisor or reverse mortgage specialist to help them determine if it is the best option for their particular situation. Smartfi Contributor Our Smartfi Contributors are made up of a collective group of mortgage industry professionals, who share their personal opinions of the mortgage industry, topics, and various products. These are the express opinions of the Smartfi Contributor, and the article is based on their opinion and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by Smartfi Home Loans, LLC. Reverse mortgage proceeds may affect the eligibility and payments of Medicaid, SSI and similar program benefits. All clients should be advised to seek guidance on their financial situation with their financial planner/advisor. A reverse mortgage is not suitable for all clients in all situations. All loans are subject to loan underwriting and must meet all product requirements. Programs can change at any time, please see product handbooks for full underwriting guidelines. *Borrower must pay property taxes, insurance, any HOA fees and maintain the property.