Learn How the New American Recovery & Reinvestment Act of 2009 Signed Into Law by the President on February 17, 2009 Can Help You Supplement Your Retirement Income
It’s not uncommon for a personal residence to be a family’s most valuable asset.The problem in leveraging this valuable asset is the home’s relative lack of liquidity, but now there is relief for “house poor” homeowners.
Congress has recently approved new guidelines enhancing the lending limits under the FHA program called the Home Equity Conversion Mortgage (HECM). These enhanced limits allow seniors to gain a greater income benefit than ever before.
To learn more about reverse mortgages and how they can free up home equity for income and other expenses, we interviewed Bruce Barnes, President of EquiPoint Financial Network, a San Diego reverse mortgage leader.
Kevin: Bruce, thanks for stopping by to talk to us about this important new legislation and how it’s really going to help folks more than ever before. How have these new guidelines changed the reverse mortgage program?
Barnes: Over the past few years, most senior homeowners have been introduced to this program but many are still uncertain about how they really work. The basics are still the same: you need to be 62 or older to qualify and there are no income, credit or health requirements. Additionally, no payments are required as long as the homeowners live in their residence.
Kevin: That’s great, Bruce, so how is this program different today?
Barnes: That’s a good question because there have been numerous changes that have enhanced the program since its inception. Most of all, lending limits have been raised so that seniors may access more of the equity in their home than before. At the same time, the government has created better regulations to protect seniors while focusing on creating a true retirement benefit. In fact, most seniors don’t know that they may use this program to simply refinance their current mortgage with a lower interest rate. And just like a normal loan, they may continue to pay their mortgage down and pay it off.
Kevin: So let me get this straight, a senior may use this program like any other type of loan?
Barnes: Absolutely. However, unlike a traditional loan where a payment is required, a reverse mortgage provides the flexibility to make no payment at all. Homeowners may also pull extra money from their home to pay off debts, increase their income, take a vacation and live better in retirement. Honestly, anyone with a current mortgage or investment portfolio that is down needs to consider this benefit more seriously. It may simply provide greater security and peace of mind.
Kevin: That’s good, but don’t seniors have to give up ownership of their home to the bank?
Barnes: No! This is one of the biggest misconceptions about the reverse mortgage and it is completely untrue. With a reverse mortgage, seniors never give up ownership of their home. If they decide to sell their home, the equity remaining after the loan’s payoff remains theirs or will go to their children or beneficiary if they have passed.
Kevin: It looks like the reverse mortgage really provides senior homeowners with a lot of choices and that’s always good. One more thing before you go. We all like David Letterman’s Top 10 lists, so what are the “top” reasons why folks are getting reverse mortgages today?
Barnes: That’s an easy one, but I’ll keep it simple and provide just the Top 4.
Most people get a reverse mortgage to:
1) eliminate an existing mortgage payment.
2) increase monthly income because investments are down.
3) fund medical and long-term care solutions.
4) create a better lifestyle.
Kevin: Excellent. Who knew your home could do so much for you while it’s just sitting there? Thanks for your time, Bruce. We hope you’ll join us again soon.
Barnes: You’re welcome. I enjoyed answering your questions.
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