Owning a home has always been a part of the American Dream, so it shouldn’t be surprising that home equity accounts for a large portion of the average retiree’s net worth. As more and more Americans are nearing retirement, leveraging home equity will become an important part of a smart retirement plan. There are a number of ways to tap into one’s home equity, one of them being a reverse mortgage.
Though historically reverse mortgages have had a less than perfect reputation, new regulations are making them an increasingly popular option for seniors. For example, in recent years there have been concerns about homeowners going into technical default. Technical default happens when the homeowner is unable to pay property taxes, homeowners insurance, or other homeowner fees. In an effort to reduce the number of reverse mortgage borrowers facing this dilemma, the government has added stricter consumer protection measures in the form of a financial assessment screening. This screening helps to determine if potential borrowers are actually able to get a reverse mortgage.
These new rules apply to the Home Equity Conversion Mortgage (HECM) program, which is the primary reverse mortgage program accounting for about 95% of the market. They require potential borrowers to demonstrate their ability to keep up with fees that will keep them out of technical default. This new initiative is preventing people who are likely candidates to enter technical default from getting a reverse mortgages mortgage in the first place.
In the past reverse mortgages were used by the wrong people at the wrong times, thus leading to slews of problems and a poor reputation for reverse mortgages. Now, with stricter regulations in place, more qualified individuals are making use of the product and the results are much more positive. Instead of being used as a last ditch effort to secure funds for retirement, reverse mortgages are now being used as a strategic tool to increase income in retirement.
To learn more about how qualified homeowners are using reverse mortgages in their retirement planning, call the Reverse Mortgage Specialists at FirstBank in Hilton Head. The Reverse Mortgage Specialists will help you understand the product and assist you in determining if a reverse mortgage is a good idea for your particular circumstances.
FirstBank is a 107-year-old FDIC insured bank. It is a long-standing member of the Better Business Bureau where it holds an A+ rating. FirstBank is also a subscribing member of the National Reverse Mortgage Lenders Association (NRMLA), and an approved direct lender with the US Department of Housing and Urban Development (HUD).