Reverse Mortgages have broad application for retirees and seniors depending on the current health of the applicant. For those that are generally healthy and desire to stay in their home, the likely strategy for adding a reverse mortgage would be increasing monthly cash flow and adding a credit line for emergencies. Beyond this, there is also a very significant estate planning benefit over the long term, as you age in place, that is provided by the “non-recourse” aspect of the reverse mortgage.
Increased cash flow, or in other words, more disposable cash in hand monthly, is achieved by paying off mortgages and other debts and replacing them with a reverse mortgage which does not require a monthly principal and interest payment. An increase in monthly cash flow from the perspective of someone living on a fixed income, primarily comprised of Social Security and/or a small pension, can be significant to one’s lifestyle. From a moderate monthly income base, an additional approximate $1,000 per month in cash flow can be a game changer.
Achieving this newfound leverage and monthly cash flow from your home can be a real positive boost to your lifestyle but it is not free. The reverse mortgage does not require a monthly mortgage payment ever, but you do lose a sliver of home equity each month as the home essentially makes the payment for you. The balance of the loan will grow slightly each month based on the interest and insurance due and your general credit line usage.
Lastly, by having a non-recourse loan your family and heirs have an attractive option to buy your home from the lender if it’s underwater, if desired, but there is no financial obligation nor is there any responsibility for losses on the loan. This is a very attractive loan feature for estate planning.
George H. Omilan
President-CEO - NMLS# 873983
Jefferson Mortgage Group LLC - Mortgage Specialists
Programs: Traditional QM (Fannie Mae, Freddie Mac), government insured HECM Reverse Mortgages, and Non Traditional Non-QM Mortgages commonly referred to as Specialized Forward Mortgages including “Alt-A Investor loans” and DSCR (Debt Service Coverage Ratio) loans up to 85% LTV, both Full doc and No Income-No Employment (No Doc) for the investor community. Our expanded niche products also focus on the more traditional FHA & VA with Lower Score and higher Debt-to-Income Options, Fixed & Variable Jumbo loans, and Private Label Reverse mortgages for higher priced homes. We are also highly focused on specialized loans for the Self-Employed borrowers with our Bank Statement & Asset Dissipation Programs. We are committed to offering a full range of “Non-QM Loans” for expanded qualification, where the banks and large-scale lenders dare to go.