Letting the lender sell the home to satisfy the loan (and any proceeds above the loan payoff will still be paid to you or your heirs).
Selling the home and using the proceeds (plus the FHA insurance, if necessary) to pay off the loan.Writing a check for the balance due (from financial assets or a new mortgage).Therefore, either you or your heirs can pay off the loan by:.This is because, as part of the loan fees, you pay for an insurance policy required by the FHA that will make up the difference between the proceeds of the sale of the home and any shortfall in the loan payoff. In fact, one advantage of the reverse mortgage is that, should your house sell for less than what is owed to the lender, the lender cannot come after you or your other assets to satisfy the loan. When the house is no longer yours (or your primary residence), the loan must be repaid. As far as your ownership of the your house is concerned, it is the same situation you (or your heirs) would be in if you have a traditional mortgage. First, let's dispel one of the major myths about a reverse mortgage - you are not selling your house to the mortgage lender.
Here's what you need to know about reverse mortgages to determine if you should consider using it as part of your retirement planning The property must be your primary residence and meet all FHA property, flood, health and safety standards and receive an FHA appraisal. To qualify, you (and any other person on the title - Texas requires all borrowers) must be at least 62 years of age (there are special rules if a spouse is less than 62), have no other federal debt, have enough income to cover tax, insurance and maintenance expenses associated with the house and receive certified counseling on home equity options. Instead of using the money only to purchase or renovate a house, the proceeds of the reverse mortgage can be used by the borrower for virtually anything they wish. You can find out more information on jumbo reverse mortgages in this article.Ī reverse mortgage is conceptually the same as a traditional mortgage, except that there is no set monthly repayment required. These loans, also referred to as private or proprietary reverse mortgage loans, aren’t bound by the same regulations as government-backed home equity conversion mortgages (HECMs), resulting in higher borrowing limits (hence the name jumbo), but also potentially fewer protections. A jumbo reverse mortgage is a supersized reverse mortgage that lets older owners of high-value homes borrow up to $4 million of the equity in their property. There is another kind of reverse mortgage available, known as a Jumbo Reverse Mortgage. In this article, we will cover only the Home Equity Conversion Mortgage (HECM), the most popular type of reverse mortgage, and the one most suitable for retirement income planning. Like most financial planning solutions, it has a specific purpose that can provide a particular benefit or address a measurable risk. As a result, the federal and state authorities stepped in and tightly regulated the products (as evidenced by the fact that the paperwork to get a reverse mortgage now exceeds that of a regular mortgage!). In addition to being heavily marketed by celebrity spokesmen, abuses and misuse were rampant. Pfau or his publisher.Īt one time, reverse mortgages had a bad reputation. Stout Bowman & Associates has no affiliation with Dr.
#Wade pfau reverse mortgage calculator how to#
The following information comes primarily from the book Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement by Wade Pfau.
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