Knowledge Center

All About Reverse Mortgages

educating-myself | Read Time: 3 minutes

By WSFS Contributor | Published: 2019

reverse-mortgage

When you’re preparing for your financial future, it’s smart to think about what you’ll need for a comfortable retirement. If you’re looking at your options and you want to supplement your income, pay off debts or be ready to take care of unexpected expenses, a reverse mortgage could be a viable option.

Once you’ve turned 62 years old, you may be eligible for a reverse mortgage. A reverse mortgage takes part of the equity you have in your home and provides you with money via a loan that doesn’t have to be paid back until you no longer live there. Instead of paying monthly for your mortgage, you’ll receive payment for borrowing against the equity in your home.

Not everyone who is 62 is eligible though; you must completely own your home or have minimal mortgage payments left that can be paid off at closing with the money you receive from the loan. The house also must be your primary residence. The good thing is that you can never owe more than the value of your home in a reverse mortgage loan. For example, you do not have to pay the difference between your overall reverse mortgage total and the price of your home when you sell it.

You’ll go through a similar process as with any mortgage product, which includes an application, appraisal, underwriting and closing. This loan process typically takes about a month from application to closing. If you’re debating on whether this option is right for you, it’s important to understand the different kinds of reverse mortgages.

Types of Reverse Mortgages
Single Purpose Reverse Mortgages – Offered by some state and local government agencies in some regions, this is the least expensive option. It can only be used for purposes approved by the lender, like home improvements.

Proprietary Reverse Mortgages – This is a loan offered by private entities that allow those with higher-valued homes to obtain more money through the loan.

Federally-Insured Reverse Mortgages – These are also called Home Equity Conversion Mortgages (HECMs). HECMs are created and backed by the federal government and can be used in any way you desire. HECMs and proprietary reverse mortgages are more expensive than traditional home loans and the upfront costs can be higher, but you usually don’t have to face specific requirements with income. You will have the ability to choose among several payment options:

  • Term
  • Tenure
  • Combination
  • Line of credit
  • Single disbursement

There are many factors that play into how much of a loan you’ll receive. These include your age, the value of your home, the interest rate and if the money you’re requesting is less than the appraised value of your home or under the FHA mortgage limit of $625,500. Usually, the older you are and the more valuable your home is, the more money you can receive. Additionally, your payments could be structured differently based on what kind of preexisting mortgage you have. If you have an adjustable-rate mortgage (ARM), you can choose a lump sum, fixed monthly payments, a line of credit or a combination. A fixed rate mortgage means that you can only receive a lump sum payment.

When investigating potential financial avenues for retirement, make sure you weigh your options heavily because a reverse mortgage is a big decision. If you think a reverse mortgage could be the right move for you, contact WSFS Reverse Mortgage Loan Officer Henri Belcher-Stack.



How to Choose the Right Loan to Remodel Your Home, Make a Large Purchase or Consolidate Debt

With so much talk around home buying and refinance rates driving the housing market this summer and fall, many want to capitalize on the low rates. Homeowners are choosing to make improvements to their existing houses to accommodate remote working and schooling, or other comforts to gain more living space.

Read More

A Successful Retirement Starts with You

It starts with you. With retirement a mere five to ten years away, many Americans will start to panic thinking (perhaps appropriately) that they are not on track to retire comfortably. In the decade that I have been an advisor, I’ve seen many unique stories that all share a common thread – the desire to live life to its fullest through the choices we make, the things we own and do, and the people most important to us.

Read More

How to Choose the Right Financial Advisor for You

Most Americans believe in managing their own money. While that is ok for some, for others, they may find themselves lost and unprepared for retirement. What often bridges the gap between financial freedom in retirement and those unprepared for life’s financial challenges is an Advisor.

Read More

Building Wealth During Different Life Stages

Investing should be viewed as a lifelong process. The earlier you get started, the better off you’ll be in the long run. Whether its saving for retirement, a new house or college tuition, most of us will need to develop a disciplined savings strategy.

Read More

Effects of Asset Inflation Outpacing the Cost of Living

A dollar today does not represent a dollar tomorrow. Inflation is the cause of that fact. Traditional measures of inflation have depicted a lower rate of inflation over the past 20 years. However, measures used by the government agencies are missing other forms of price increases that cannot be ignored and should be considered.

Read More