SAHBA Home Hints
April 27, 2008
Reverse Mortgage Could be a Tool to Help Retirement
Homeowners reaching retirement age have much to consider when it comes to their finances. Those 62 and older are eligible for a reverse mortgage as a way to help secure their income.
A reverse mortgage can help senior citizens build financial security and help fund their retirement. The mortgage draws cash from the home's equity to generate tax-free income for the owner.
“Retirement is now somewhat of a process, not an on-off switch,” said Michael Palmer, Nova Home Loans Senior Loan Officer
Baby boomers have started to rewrite the book on retirement. The new trend for reluctant retirees is to settle into a low-stress, part-time job that ensures a small amount of new cash flow.
Part-time jobs, Social Security, and reverse mortgages all can be used as pieces to their income puzzle. As boomers enter the traditional age of retirement, leveraging their assets is important.
“A reverse mortgage is a way of employing the equity that is tied up in a house,” said Palmer, a SAHBA member.
There are different types of reverse mortgages to consider:
• Federally Insured: Home Equity Conversion Mortgages (HECM) are backed by HUD and can be used for any purpose.
• Public Sector: These loan programs from the state or local government are tailored for homeowners with low or moderate incomes, generally utilized for specific mortgage-related expenses.
• Proprietary: Like HECMs, these can be used for any purpose, but are owned and backed by private companies.
The type of reverse mortgage is just one item a potential borrower needs to consider. Palmer cautions all soon-to-be retirees and advises them to evaluate their expectations for retirement. One aspect is longevity. After a reverse mortgage is paid out, the principal, interest charges, and service fees must be paid from the sale or refinance of the home.
Reverse mortgage loans must be repaid when one or more occurs:
• The borrower permanently moves out of the house
• The last surviving borrower dies
• The borrower fails to live in the house for 12 consecutive months
• Failure to pay property taxes or insurance
• There is deterioration of the property beyond normal wear and tear
Details: Palmer at (520) 745-0050.
SAHBA represents about 750 member businesses and 40,000 jobs serving the residential construction industry in Pima and Cochise counties.
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