I was fortunate to recently work with a senior who was very strategic and smart about using her home equity. This 82 year old was as sharp as they come, highly educated and in the financial field. She needed to access $300,000 for a short period of time (less than a year) and didn’t want to withdraw funds from retirement accounts, IRA’s, CD’s and the like. So she looked into the new HECM SAVER.
Things she considered:
- Upfront Fees - Much lower on the SAVER
- Interest Rate - Lower on the Adjustable
- Available Funds - SAVER provided plenty for her needs and using the ARM allowed her to only access the amount she needed.
Because she lived in a high value home worth over $800,000, she was able to qualify for $344K in funds with zero origination fees, zero upfront Mortgage Insurance Premium. In about six months she will repay the reverse mortgage down to a very small balance to keep the equity line available should she ever need access to it. (No prepayment penalties on a HECM Reverse Mortgage)
Here is a snapshot of what she did.
- $800,000 Home Value
- $344,000 Appx Available Loan based upon Age, Interest, Lending Limit
- $ 2,400 Closing Costs
- $ 0 Payoff Current Mortgage
- $341,600 Available Loan Proceeds
- $300,000 Lump Sum Disbursement to her Checking Account
- $ 41,000 Line of Credit
In six months, when she is ready to repay the loan, I advised her to just pay the loan down to a very small balance. (If she completely pays it off that will close the loan) Since the loan is an “Open-Ended” loan if she just pays it down her line of credit will correspondingly increase. That increased line of credit can be used in the future for unexpected financial needs that may come up (Medical Expenses, In Home Care, Other Needs)... or she may never need it. The carrying costs on that paid down loan would be very small. In my personal opinion this is a great example of a strategic use of of an HECM SAVER Adjustable by a savvy Senior!
By Deborah Nance
Your Local Southern California Reverse Mortgage Professional
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iReverse Home Loans, LLC, NMLS#810502 originates reverse mortgages in Alabama, Alaska, Arizona (MB-0919584), California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon (ML-5378), Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont (1164-MB), Virginia, Washington and Wisconsin.
Important Information: Reverse Mortgages are neither "endorsed" nor "approved" by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.