What is a reverse mortgage? Opposite of a conventional ‘forward’ mortgage where you pay down your principal over the years, a reverse has no principal and interest payment requirement. This means your beginning balance will increase over time. There are two significant advantages; 1) your monthly payment obligations are now taxes, insurance (and HOAs if applicable) no principal, no interest; 2) property valuation tends to grow at a faster rate than the principal. Basic qualifications are age 62 and 50% equity in your home or subject property.

Can I buy a home using a reverse mortgage? YES! An age 62+ buyer purchasing your primary residence may put 50% down payment. The remaining balance requires no monthly principal and interest payments.

Will my children get the equity when I pass? YES! While many parents feel they’d like to leave their children their home when they pass, reality is most families sell their parents’ home which can cause anxiety among family members.  With a forward mortgage, monthly payments must be continued while settling your estate which could be several months and that burden is passed onto your family. A reverse mortgage continues to accrue balance but allows up to 12 months to sell the property wherein during that time your family carries no burden other than taxes and insurance.

Can I take money out for living expenses? YES! Money from your home is not considered income so you receive it tax free. You have the option to a one time lump sum payout, an established monthly amount to help pay your living expenses over and above social security and pensions, or as a line-of-credit.

Is there a way to better understand a reverse mortgage? Yes! To protect you and your family, all reverse mortgage applicants are required to take a class to clearly understand the intricacies of a reverse mortgage. Classes are provided by an independent third party via telephone and internet. When you graduate you will be eligible to complete your transaction.

Will the bank take my home? No! There are three circumstances in which your home will convey 1) you sell your home while you are living and use the net proceeds for your next plans 2) you pass away and your family has up to 12 months to sell your home and they receive the net proceeds 3) you neglect your obligations for taxes, insurance, HOAs and upkeep and risk foreclosure. In every scenario you have access to your Mortgage Loan Originator and your lender Account Executive to assist in knowing your options at any given time.

Can I retire in Hawaii and utilize a reverse mortgage? Yes! A reverse mortgage allows you to optimize your cash flow by eliminating the monthly payments used toward principal and interest. What is that amount to you? Would that make a difference in your quality of life?

Big Island Mortgages by Doug Mallardi

(808) 333-4341 doug@bigislandmortgages.com

Start an online loan application, click here.

Schedule an appointment, click here.

Did you know…..

• You maintain title and ownership of your property.
• As long as you or your (qualified) spouse live in your home you remain.
• Your home repays the loan when you sell or pass away.
• Pay off your existing mortgage and enjoy your retirement.
• You can purchase a new home with a HECM.
• If your loan surpasses your home’s value the insurance policy ensures your heirs owe nothing.

Click Here to see Reverse Mortgage Scenarios

The information below helps put a finer point on why HECM loans should be a consideration in today’s economy. This info is from a report created by Clever Real Estate- Retirement Finances: 2023 edition:

• The average retiree has $170,726 in savings — down from $191,659 in 2022.
• Nearly half of retirees (48%) believe they’ll outlive their retirement savings.
• 71% of retirees have non-mortgage debt, with an average balance of $19,888. Nearly 1 in 5 retirees (18%) have medical debt, with an average balance of $10,259.
• 2 in 3 retirees (65%) stopped working sooner than they planned, with half of that group citing health concerns as the reason (50%).
• 30% of retirees rely on Social Security as their sole source of income.
• 60% of retirees say their former employers did not do enough to help them prepare for retirement.
• 44% of retirees say they struggle to afford basic living expenses.
• 1 in 3 retirees (32%) have considered rejoining the workforce in some capacity.

Helping Seniors to know that there are other ways of putting the greatest asset that most seniors have, their home equity, to work for them can help create a greater sense of financial security in many cases.