Planning for Retirement the Smart Way...With a Reverse Mortgage

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Mortgage and Lending with PS Mortgage Lending 305-791-4874 or 888-845-6630 365768

Planning for Retirement the Smart Way...With a Reverse Mortgage

The recent announcement of the financial assessment, which is to be implemented on March 2015, has sprung a slew of news stories describing the potential benefits and risks of the reverse mortgage. 

Despite the fact that positive press was up in the months of June and July, there is still a negative stigma associated with the reverse mortgage, and I am not talking about the fear of losing your home this time. In fact, what called my attention in the article, Reverse Mortgages: Are they worth the risk?, was something else: closing costs.

I've had clients tell me before that one of the deterrents for them is closing costs. They say the closing costs of a reverse mortgage is considerably higher than those of home equity line of credit. While this is true, it's important to think about the differences in both programs, mainly, that borrowers do not have to make payments on the money they borrow. With a HELOC, however, they do and in ten years the payments are sure be higher than they were before because the loan balloons. 

In addition, a reverse mortgage carries a mortgage insurance premium, which is part of the closing costs, and is added to the interest rate every year, but is one of the many methods HUD PROTECTS borrowers and their heirs.

For example, while a HELOC has to be repaid in full by borrowers or their heirs and may even be frozen in some instances if the home value drops drastically, a reverse line of credit cannot be frozen unless there are no funds left in the account. In addition, the MIP, which some may see as an unnecessary extra cost, ensures that any difference in home value when the loan becomes due and payable is covered by FHA and not the heirs.

Another interesting portion of the article discusses alternative options to getting a reverse mortgage, one of them being selling your home and relocating to either a smaller home or a retirement community.

These are viable options as well and should be considered when planning retirement, it may not be the best option for everyone. For one, selling home is a stressful endeavor and may take longer than a seller expects.

In addition, if a seller sellers there home and buys a smaller home, they will have funds left over, but how long will these funds last? Longevity is one of the strengths of the reverse mortgage, especially the line of credit because it continues to grow at 4% yearly on the unused portion.

In essence, there will be more funds in the line of credit from the time of closing to a year later if the funds remain unused and it can be tapped into whenever necessary. Stocks, bonds, social security, etc. are established forms of retirement, but considering them as the only solution may in fact hurt retirement more.

Plan for the unexpected because there is not a magic wand with which a borrower can see all that will happen in the future. A reverse mortgage can supplement and complement even the most thought out retirement, consider it in your plans as well.

Interested in a reverse mortgage or simply want more information? Give PS Financial Services a call at  (888) 845-6630 or via email at info@PSReverseMortgage.com. We don't pressure those who inquire. We are simply here to help.

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Information and content in this blog is original to Phil Stevenson

Please click the "SUBSCRIBE TO MY BLOG" button on the right, and receive more Traditional and Reverse Mortgage information in Florida and other parts of the US & Puerto Rico.

 

Phil Stevenson

PS Financial Services

Owner and Principal Mortgage Originator

Certified Reverse Mortgage Professional (CRMP)

LO #365768

NMLS #968090

Cell: 888.845.6630

Miami Mortgages & Florida Mortgages

Copyright © 2013 by Phil Stevenson & PS Financial Services, LLC

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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I see absolutely NO stigma attaching to the Reverse Mortgage.

I plan to do that very thing shortly. 

Nov 19, 2014 03:53 AM #1
Rainmaker
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Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Lenn, that is a very good thing to hear. Like anything, you have people who believe in it and others who don't, the battle is opening the general public's mind to the benefits before they make their decision. Best of luck with your own reverse mortgage!

Nov 19, 2014 04:04 AM #2
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Rainmaker
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Phil Stevenson, CRMP

"Mortgage Nerd" in Miami, Florida and Texas
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