How a reverse mortgage helped a senior homeowner improve her monthly cashflow, eliminate debt, and establish a line of credit
Reverse mortgages can be a helpful resource for seniors who want to create a stable financial situation in their retirement years. Here’s an example of how a reverse mortgage benefitted a senior homeowner.
The situation:
- Jenny (age 63) owns her home, which is worth $450,000.
- Her existing mortgage balance is $100,000, and she pays $1,400/month (principal & interest).
- She has an additional $15,000 in credit card and car loan debt, with total monthly payment of $600.
The solution:
- Jenny refinances with a Home Equity Conversion Mortgage (a type of reverse mortgage) for $160,000.
The benefits:
- Jenny eliminates her monthly mortgage (principal & interest) payments, increasing her cashflow by $1,400 per month.
- She also eliminates her monthly credit card and auto loan payments, increasing her cashflow by $600 per month.
- After paying off her mandatory obligations, Jenny has enough left to create a $25,000 line of credit that will grow at the same interest rate as her loan balance.
- The loan balance doesn’t have to be repaid until she sells the home or passes away.
- Once the loan is repaid, any remaining equity goes to Jenny or her beneficiaries.
- If the loan balance exceeds the property value, there is no debt obligation for Jenny or her beneficiaries (the home can be sold for 95% of current fair market value).
Is there someone in your life (ages 62+) who might benefit from a reverse mortgage? We offer complimentary consultations. Contact a trusted Reverse Mortgage Specialist at Waterstone Mortgage to get started.
It’s our goal to help senior citizens create a more financially stable and secure retirement.
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through a Federal Housing Administration (FHA)-approved lender. Not all reverse mortgages are FHA insured. When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. A lender may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan). The balance of the loan grows over time and you are charged interest on the balance. Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). There is no escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.
