- March 13, 2018
- Posted by: steve
- Category: reverse mortgage
Reverse mortgages are complex but are rewarding to seniors who need assistance. Learn about the facts and requirements of a Florida reverse mortgage.
Florida is home to beaches, palm trees, and year-round sunshine. With exciting cities, beautiful homes, and plenty of fun to go around, it’s no surprise that so many people settle here.
But there’s another interesting facet to Florida that few people are aware of.
Believe it or not, Florida has one of the nation’s highest numbers of reverse mortgages!
There are thousands of Florida reverse mortgage properties across the state. And this figure is likely to grow not just in 2017, but in years to come.
Florida gets the reputation of being a hotbed for retirees. But it’s still no coincidence that the majority of Florida reverse mortgage homeowners are seniors.
Reverse mortgages offer some of the most rewarding opportunities for senior citizens. Here’s how reverse mortgage works and how seniors can qualify for one!
What Is a Reverse Mortgage?
Month in and month out, borrowers make payments and chip away at their mortgage loan. Eventually, they pay it off, but this usually takes anywhere from 10 to 30 years.
Of course, the time it takes to pay off a mortgage depends on several factors.
Some loans have fixed or adjustable interest rates. One’s income and savings is another crucial variable that can affect how long it takes to pay off a mortgage.
Most senior citizens are close to or have already paid off their existing mortgage loan. So, things like interest rates and monthly payments will not come as a surprise to them.
A reverse mortgage, on the other hand, may not be something they’re familiar with. Because unlike traditional mortgages, a reverse mortgage requires no monthly payments.
Instead of making payments, a Florida reverse mortgage homeowner receives them!
How Does a Reverse Mortgage Work?
A reverse mortgage is a good and viable option for anyone who owns their current home or is close to paying it off. But to understand how a Florida reverse mortgage works, it’s important to understand home equity.
A person qualifies for a reverse mortgage based on their home equity.
Home equity measures how much a homeowner has paid into their current property. Home equity also takes the property’s current market value into account.
The remaining mortgage balance is then deducted from the market’s value listing. This amount is otherwise known as the home equity.
In simpler terms, home equity is an asset. It’s the difference between the market value of a property and what is still owed on its mortgage.
The Relationship Between Home Equity & Reverse Mortgage
Those who have paid their mortgage in full can officially call themselves homeowners. This not only means that they own their home entirely, but that they have full equity.
But official homeowners aren’t the only ones who can qualify for a Florida reverse mortgage. Those who have enough home equity also qualify.
That’s because rather than making monthly payments, lenders pay them. And the amount that a lender pays to a borrower or homeowner depends on the value of the property.
The more equity a homeowner has, the more they’ll receive from lenders. Borrowers and homeowners can also receive these funds in the form of a credit line.
In basic terms, lenders buy a homeowner or borrower’s equity. And they make these purchases in the form of monthly payments.
The loan amount is never worth more than the value of the home over the course of the loan’s lifetime.
Of course, the value of the home and present interest rates affect how much money a senior receives in funds. But there are other things that can affect the number of funds they receive.
Age is one crucial factor. The older a senior is, the more money they can receive. The age of the youngest spouse is also taken into account.
Another factor that’s taken into account is preexisting interest rates. Depending on the lender, these interest rates may still be applicable. Outstanding home loans will most likely apply, as well.
Then, there are upfront costs. These are fees charged by the lender that also make up one’s Florida reverse mortgage.
Lenders look at the initial mortgage insurance premium. This is also based on the value of the property. This cost protects both the lender and the homeowner.
The government receives the initial mortgage insurance premium. They can use this to pay out the lender if they have to sell when the loan balance is greater than the property value.
Other upfront costs include an origination fee charged by the lender. Under the HECM (Home Equity Conversion Mortgage) program, origination fee varies.
Specifically, origination fee depends on property value. There is a minimum and maximum fee allowance based on the property value of a home.
There are also closing costs. These include credit check, home appraisal costs, and more.
Reverse Mortgage Responsibilities
Reverse homeowners still have to pay insurance and property taxes. Their monthly expenses will never increase. Nor are they expected to pay back the loan until they leave the property (for whatever reason).
So long as they pay their property taxes and homeowner’s insurance, they’ll never have to make payments towards the loan.
Some Florida reverse mortgage lenders may require necessary home repairs and maintenance. Reverse homeowners have to abide by these requirements and carry them out accordingly.
Ownership & Loan Lifetime
Like traditional mortgages, interest also accumulates over the lifetime of a reverse mortgage. But unlike traditional mortgages, a homeowner’s home equity diminishes as opposed to growing.
A reverse owner or homeowner still has the title over their property. They own this title until they default on their property taxes or on their insurance.
The Florida reverse mortgage loan is due if the homeowner sells and moves. The loan also becomes due if the borrower passes away.
But the lender never owns the property. This is the case while the homeowner lives there, and after when the property is vacant.
It’s no surprise that seniors make up the majority of reverse mortgage homeowners
Lenders will redeem the amount of money paid to the homeowner by selling the property. Any remaining equity then goes to the homeowner or their beneficiary.
Who Qualifies for a Florida Reverse Mortgage?
It’s no surprise that senior make up the majority of reverse mortgage homeowners.
That’s because many of them are close to owning their homes if they don’t already. They are usually the highest qualifiers because they’ve accumulated substantial home equity.
But anyone with full home equity qualifies for a reverse mortgage. Floridians who have a lot of home equity can usually apply it on their Florida reverse mortgage.
The FHA’s Requirements
These loans are available to anyone over the age of 62. They were initially developed in the 1960’s to help retired senior citizens.
Reverse mortgage loans are often referred to as HECM (Home Equity Conversion Mortgage). The HECM is a Federal Housing Administration program. The FHA delivers financial security to American senior citizens.
The FHA requires reverse mortgage homeowners to own the property. In other cases, they must – at least – have a considerably low remaining mortgage balance.
The FHA also requires homeowners to cover their property taxes and insurance. Without covering these costs, homeowners can default on their reverse mortgage.
The Benefits of a Florida Reverse Mortgage
The lack of monthly payments is especially beneficial to seniors. It means less pressure on them to come up with the money, and more time to enjoy themselves under their new roof.
But there are several ways reverse mortgages benefit seniors. Before delving into them, it’s important to understand the benefits of home equity.
Flexible Funding with Home Equity
Those who have a substantial amount of home equity can receive a considerable sum of money. This amount of money can then apply for funding for a reverse mortgage on a new piece of property.
But home equity, as an asset, also applies in other ways.
When a person has accumulated enough home equity, they can open a line of credit. Some borrowers even use their home equity to pay off existing credit card debts.
In other cases, borrowers set aside the lump sum of money they receive from their home equity. Many set this money aside for medical or emergency funds. Sometimes part of a home equity can convert into cash.
Some borrowers who’ve accumulated enough home equity decide to take out a reverse mortgage. Here’s why…
Seniors Can Maintain Ownership Because of Reverse Mortgage
To access one’s home equity, they often have to sell their property. This often means having to let go of a meaningful piece of property.
Naturally, this is a difficult thing to do. After all, they’ve accumulated decades worth of memories in their home.
But the realities of aging can often put seniors in a tough situation. They may have rising medical costs or debts to pay off. Many are physically unable to work, so money can become tight.
Though they may not have a lot of cash, they may have a large amount of money tied up in their house. This money is in the form of home equity, and it can go towards funding their expenses.
With a Florida reverse mortgage, seniors can use their home equity without having to move!
There’s no limit to how a person uses their monthly reverse earnings. So, they can cut stress and improve their quality of life!
Downsizing Is Possible with a Reverse Mortgage
Most seniors adopt a Florida reverse mortgage to fund their medical bills and living expenses. But some use their reverse mortgage payments to downsize and move to a more suitable home.
As adults grow older, it becomes harder to get around and go about their daily lives. Unfortunately, some senior citizens lose their mobility and independence.
In these cases, downsizing is the next best option.
A senior who can no longer climb up the stairs would benefit by downsizing to a 1-story ranch, for example. This is not only easier on them, but it’s the safest way to prevent future accidents.
With monthly reverse mortgage payments, it’s possible to afford more suitable living quarters. This is especially possible for seniors who already own their homes.
All this is possible, so long as they pay their property taxes and insurance on their original home.
Reverse Mortgages Extend Social Security & Other Retirement Benefits
Social security kicks in at age 62. But the longer a senior waits to collect social security, the more money they’ll receive.
With a Florida reverse mortgage, Floridian seniors can hold off on social security. Instead, they can receive money from monthly payments on their home from lenders.
These monthly payments can also help seniors hold off on using their savings. Once someone starts using their retirement savings, they have to pay taxes on them.
Settle Right with a Florida Reverse Mortgage
Growing older isn’t easy. It’s hard for seniors to not only lose their independence but to deal with many of life’s old age stresses, as well.
Parting from a home is one of the biggest and hardest challenges that seniors deal with. At some point, a senior has to decide whether to continue living in their family home or to move on.
There are a number of reasons why someone would want a reverse mortgage. Florida reverse mortgages are so prevalent because of the freedom it gives homeowners.
There’s not only money in a reverse mortgage. There’s also the opportunity to live the best life possible in old age.
New Florida Mortgage is here to help you make the best decision possible when it comes to your home. If you think that a reverse mortgage is the right option for you, contact us today!