Issue 2.15
You will hear on my weekly radio show discussions on stopping your mortgage payments for life if you are over 62. I want to throw a disclaimer out there first – in that nobody should stop making a payment if you are over 62 and be late on any payments and have your credit negatively affected etc.. That is certainly not what I mean by the statement.
What I am referring to is my senior clients that are in a home they would like to retire in and seeing them making a mortgage payment on their home for the next 30 years or 20 years or whatever the term of the loan is for example. These payments will never benefit my clients directly or add equity to their home for their heirs.
Let me try and break down an actual example of what we see with our community as we have such a large population in Southern Utah that are over 62 years of age.
Let’s first start with a brief explanation of the FHA or government insured HECM loan that allows a senior client to take 50 to 60% of the value of their home and use that loan to replace their current loan and thus eliminating their current mortgage payments for life.
So, for an example if you have a home worth 300,000 and you owe 160,000, depending upon your age, you could take out a HECM government insured mortgage and eliminate your mortgage payment for the rest of you and your spouse’s life. You would simply be rolling your current conventional mortgage into a non-recourse government insured reverse HECM loan.
In the example above a typical mortgage payment is around 900.00 per month at today’s interest rates on a 30 year fixed mortgage. So, by rolling your mortgage over from a conventional loan to a government insured HECM reverse loan you could save you and your spouse 900.00 per month for life.
This is 900.00 more income monthly that you could use or put in savings that you and your spouse will have during your retirement. Do we really realize how much we are saving in this example? 900.00 per month is 10,800 per year. 10,800 per year over a 20 year retirement is 216,000.
So, this is why I keep saying on the radio and you see the television ads from Fred Thompson that if you are over 62 and you are still making a mortgage payment then you need to stop!
Want to increase your retirement savings for you and your spouse like this example and by adding he influx of the 900.00 to income instead of a payment that is increasing your retirement savings by over 200,000 and over a quarter of a million during a typical retirement? Then the HECM reverse loan might be the best option.
If you have a great retirement or if when one of you pass your spouse does not lose income and he or she will have plenty to retire on etc. Then the loan may not be for you. If you are destined to live conservatively as much as necessary to pass on the maximum amount of equity in your home to your kids or heirs then this loan is not for you. But, there is a reason that over 70% of our retirees that are moving into our community are choosing to use this loan for their home versus paying cash or continuing to make mortgage payments for the remainder of their lives.
Like any financial product it is not right for everyone. But, if you think that this loan is not an option for you, then you might want to explore your options and how it would work under your situation. Today, we have funded over 1,000 HECM reverse loans over the last five years. Cherry Creek Mortgage is the only direct lender that is authorized to fund and underwrite our own government insured reverse mortgages and we currently fund more reverse mortgages than all other lenders in southern Utah combined. So, contact our office or your financial advisor today and let’s review the current changes in the loan and your specific options with your home today. Until next time.
Brandon Hansen can be reached at 435-673-4773.