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Guarding the Golden Years
Flexible Reverse Mortgages Satisfy Broad Range of Needs for Senior Homeowners
 Many seniors are discovering that their homes can make their golden years a little more comfortable financially. Increasingly, the home has become a versatile and surprisingly liquid asset to spin off large amounts of cash that can help an elderly homeowner cover unexpected expenses, prepare for the future, or enjoy a more fulfilling lifestyle. The key to unlocking a home’s cash potential is called a reverse mortgage.
A reverse mortgage enables senior homeowners 62 or older to convert part of the equity in their home or co-op into income without having to sell the home, give up title, or take on a new monthly mortgage payment. Borrowers will never, under any circumstances resulting from the reverse mortgage, be forced to leave their homes providing they make their real estate property tax, insurance payments, and maintain the property in a reasonable condition.
Reverse Mortgage Options
Borrowers can choose to receive the reverse mortgage funds as a lump sum, monthly income (for up to life), or line of credit, or any combination. Borrowers make no monthly payments on a reverse mortgage during the life of the loan. The loan becomes repayable when the borrower sells the home or permanently moves out. In addition, the repayment amount can't exceed the current market value of home at the time the loan matures. Most important – the funds from the reverse mortgage are tax-free and can be used for any purpose.
A growing number of seniors have used reverse mortgages to help them generate the cash needed to assist with a wide variety of financial needs. In fact, reverse mortgages last year helped over 43,000 seniors enjoy a more comfortable lifestyle. This year, the industry is on pace to close a record 75,000 loans.
There are many factors behind this growth as senior homeowners realize the broad range of needs these loans can satisfy. According to a research study by Financial Freedom, the nation’s largest lender and servicer of reverse mortgages, borrowers identified their top needs these loans have helped fulfill. The list included:
- Having more money to live on;
- Making home repairs or improvements;
- Paying off bills;
- Eliminating an existing mortgage; and
- Maintaining an emergency or rainy day fund.
The most widely available reverse mortgage is the Home Equity Conversion Mortgage (HECM). Accounting for nearly 90 percent of the total market, HECMs are insured by the Federal Housing Administration. Financial Freedom Senior Funding Corp introduced a "jumbo" proprietary reverse mortgage product called ‘Cash Account Advantage’ to benefit homeowners living in higher-priced homes valued above the FHA lending limits.
Consumer Safeguards
As record numbers of senior homeowners use reverse mortgages as part of their retirement financial management, numerous safeguards have been built into today’s reverse mortgage programs. Some of the important features include:
- Borrower retains title to home;
- Cannot be forced to leave providing they make their real estate property tax, insurance payments, and maintain the property in a reasonable condition
- Cannot owe more than the current market value of home at the time the loan matures (protects heirs also);
- Limits on interest rates and origination fees;
- Mandatory counseling ensures that right product/choice is matched to the homeowner;
- Line of credit/life tenure payments cannot be outlived/lender assumes risks.
The National Reverse Mortgage Lenders Association, based in Washington, DC, has also developed a Code of Conduct and Best Practices to establish the highest standards for customer service and consumer protection in the business of reverse mortgage lending.
About Financial Freedom
Financial Freedom Senior Funding Corporation, a subsidiary of IndyMac Bank, F.S.B., based in Irvine, California, is the largest originator and servicer of reverse mortgages in the United States. Financial Freedom is a founding member of the National Reverse Mortgage Lenders Association, a nonprofit trade association, based in Washington, DC, whose mission is to support the continued evolution of reverse mortgages as an important financial option for senior homeowners.
To learn more about Financial Freedom and its product offerings, please visit www.financialfreedom.com. Financial Freedom also offers a free educational reverse mortgage video. Click here or call 1-866-719-8249 to request a copy of free Reverse Mortgage DVD or VHS.
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