Unlock Your Housing Wealth

by Kelly Godbey

One of the tricks that the top one percent has perfected is using the banks’ money instead of their own to fund their endeavors. According to the Motley Fool, “When rich people borrow, they do so because they want to improve their overall financial situation, and they can do that by leveraging the money lenders provide.”

Yes, you may be able to pay cash, but might it be better to explore a loan for purchasing your new home and invest in vehicles that could make you more money over the long term? With record levels of accumulated wealth, it is possible to leverage your home’s equity as a holistic approach to funding your retirement or at minimum improving it.

There’s always a traditional mortgage that most people are familiar with. Fifteen- and 30-year mortgage rates are still very low, even though the Federal Reserve promises to increase rates several times over the next year. Or, you might want to consider making your money work for you with a reverse mortgage.

More often than not, the term “reverse mortgage” is met with skepticism. If you’re anything like me, I wonder, what’s the catch? Do you mean I get to live in my home without paying a monthly mortgage payment? So, we asked the people at Finance of America Mortgage to shed a little light on reverse mortgages.

What is a reverse mortgage?

A reverse mortgage is an FHA insured loan that empowers borrowers to access the equity in their home or purchase a property without any required monthly mortgage payments. Interest and fees are added to the loan balance over the years rather than collected monthly like a traditional mortgage. The balance is repaid when the last remaining borrower permanently leaves the home or if the loan terms are not met.

What are the requirements?

• The borrower must be 62 years of age or older.

• The property must meet FHA minimum property standards.

• The homeowner must continue to pay all property fees, including property taxes, homeowners insurance, and HOA fees.

• You must occupy the home as your primary residence.

Do I still own my house?

Yes, you own your home just like you would with a traditional mortgage. You are free to sell your house and profit from any remaining equity once the loan balance is paid.

If interest is added to the loan amount, what happens if I owe more money than the property is worth in 30 years?

The reverse mortgage is an FHA insured non-recourse loan. The homeowner will never be personally responsible for repayment of the loan greater than the property value of the loan at the time of repayment. If you owe more than the house is worth, the home can be used for collateral to pay the deficit.

What if my children want to purchase the home at the time of my death?

They can buy the house by paying off the loan. In the event that you owe more than its worth they can even refinance or payoff the loan at 95 percent of the current appraised value.

How does the lender make money if I'm not paying a mortgage payment?

The interest on the loan is added to the loan balance. Rather than collect on the interest monthly, they collect at the end of the loan.

How much money can I borrow?

There are several factors to consider, including age, the property value, interest rate, and down payment on purchases.

How can I find out more?

Call our friends at Finance of America Mortgage’s HECM Department at 844.770.2376, or email them at connect@financeofamerica.com for a free no obligation consultation!