Reverse mortgages were originally designed and still aim to help seniors in need. However, reverse mortgages in 2020 are safer, stronger and better than ever before.
These loans have evolved so that they now have many official protections in place to make sure that borrowers are secure. More borrowers are using the loans as a financial planning tool and not just a loan of last resort.
Here are some of the reasons reverse mortgages are better than ever:
Lending Limits Have Increased
The maximum reverse mortgage lending limit increased for 2020, allowing retirees with substantial home equity to get more money than was available in previous years.
At the end of 2019, the FHA announced it would increase HECM reverse mortgage lending limits to an all time high of $765,600.
Housing Prices Are High Now
The more your home is worth, the more money you can borrow with a reverse mortgage.
According to recent price information, home values are now higher, much higher than they have been in recent history.
While the real estate industry hopes that homes will retain their value, it is unclear what impact the pandemic will have on prices over the next few years.
Interest Rates Are Low
The lower the interest rate, the more money you can borrow and the less the loan will cost you.
Interest rates are still at all-time lows, making now a good time to consider a reverse mortgage.
Different Reverse Mortgage Payouts for Different Needs
Reverse mortgages are flexible and offer different payout options for different needs:
Cash: You can get access to cash if you need money right away.
Line of Credit: A reverse mortgage line of credit gives you flexibility. You don’t have to pay interest on the money in the line of credit, but it is available to you if you need it and it grows at a good interest rate. The line of credit has made reverse mortgages really appealing to many financial planners and their clients who want options and back up plans.
Payments: If you are worried about retirement income, you can opt to take your reverse mortgage proceeds as monthly payments that will last your lifetime.
Protections for Spouses
It is not unusual for one spouse to be older — even significantly older — than the other.
This used to be a problem for reverse mortgage borrowers because the younger spouse ran the risk of running out of money and not being able to stay in the home due to reverse mortgage age restrictions. New regulations protect younger spouses and are designed to make sure that the proceeds of the loan will last as long as both spouses live.
Flexibility for Erratic Times
When the economy is erratic, smart money managers look for ways to increase financial flexibility.
Getting a reverse mortgage is one way to increase your financial options. Instead of simply being able to earn money or withdraw from existing savings, a reverse mortgage gives you another financial resource — you can “withdraw” from your home equity.
Financial Counseling Session
All potential reverse mortgage borrowers are required to undergo a financial assessment and counseling session. This is a great opportunity to learn about the loan and how it will impact your short and long term financial health.