REVERSE MORTGAGES IN LOUISIANA
You may not be aware that there is a legal, safe, and effective way to be paid to remain in your home throughout your retirement for as long as you occupy the property — a Reverse Mortgage.
The program is open to all seniors over the age of 62 who have equity in their principal residence and wish to obtain up to $726,525 under FHA terms or more under private terms.
We can assist you with using a reverse mortgage to prepare for a long and fruitful retirement using the equity in your home.
WHAT IS A REVERSE MORTGAGE?
A reverse mortgage is a non-recourse loan that allows homeowners aged 62 and older to convert home equity into cash or as a means to purchase a new home without having to worry about paying a monthly note. This type of mortgage does not require the homeowner to make loan payments, unlike a forward mortgage used to buy a home. The loan balance becomes due and payable in one of the three following cases:
- When the borrower dies
- After they move permanently
- If they sell the home
How does a Reverse Mortgage work?
With reverse mortgage solutions, lenders make payments to homeowners – hence the name. The borrower can choose how they want to receive the borrowed funds:
- lump sum
- fixed monthly payment
- term payments
- line of credit
- equal monthly payments and a line of credit
- term payments plus a line of credit
What are the requirements and rules for a Reverse Mortgage?
The primary requirements for a reverse mortgage are simple – be 62 or older and have equity in a principal residence. However, there are a few other requirements prior to closing:
- You must have at least 50% of equity or own your home free and clear.
- As a borrower, you must pay an origination fee, as well as interest payments, loan servicing fees, up-front insurance premium, and ongoing mortgage insurance premium.
- The borrower must attend a third-party counseling session by an HUD-certified nonprofit agency that is designed to protect seniors.
- As a borrower, you must stay current on property taxes and homeowners’ insurance, as well as keep the home in good repair.
- The lender will have an FHA appraisal done on the property to determine its market value.
What are other non-income reasons to enter into a reverse mortgage?
There are actually a number of very good non-income reasons for entering into a reverse mortgage. In addition to tax savings, a reverse mortgage offers seniors:
- The ability to remain secure in their home until death
- A tool to move closer to children or grandchildren
- The ability to downsize to a more retiree-friendly home
- The ability to use investable assets to acquire additional investment properties
- The ability to improve their living situation by moving into a bigger house or better area
These factors help to support the economic logic of entering into a reverse mortgage for particular types of seniors.
PARTIES INVOLVED IN A REVERSE MORTGAGE
There are always at least three parties involved in a reverse mortgage:
- the borrower
- the lender
- and the title company.
Frequently, real estate agents are involved in providing guidance to homeowner borrowers as well.
Borrower
The borrower is the owner of the principal residence who would like to convert their home equity into one or more tax-free cash payments to be used for essentially any purpose.
Lender
The lender is the financial institution that agrees to lend the borrower money in exchange for a mortgage on the property. The lender will not require any payments from the borrower. The lender pays the borrower.
Title company
The title company’s role is to facilitate the transaction by verifying compliance with all closing rules and regulations, having the borrower and lender sign relevant paperwork, and by holding the loan proceeds in escrow until all paperwork has been completed.
Real estate agent
The agent’s role in the process is to provide objective guidance for seniors who may be good candidates for a reverse mortgage. This guidance involves determining the client’s needs and potential qualification level, a market value of the existing residence, and finding an appropriate new residence for them (if applicable).
Schedule a free call with our specialist!
PROS AND CONS OF USING REVERSE MORTGAGE
Consider that a reverse mortgage has a number of very attractive features for seniors, such as:
- The borrower can remain in their home until they die
- No income or credit verification
- You can choose how you want to take your funds
- No monthly or annual payments
- Repayment is made once the borrower dies or moves out of the house
- Proceeds are tax-free and can be in a lump sum, stream of payments, line of credit, or combination thereof
- Interest may be tax deductible on loan repayment (consult tax advisor for details)
- The loan is fully insured by the federal government
- The heirs still inherit the home • the loan proceeds can pay off existing mortgages
- Great for seniors whose net worth is tied up in the value of their home
- The process does not impact
- Social security or medicare
Recent changes to the program also allow you to purchase a property and never make a payment, with the down payment amount decreasing according to age. For example, a 62-year-old person could make a 38% down payment on a property and never make another payment again. In many cases the sale of the first home could cover the cost of the down payment, leaving you with one less payment to worry about every month during your retirement.
Contact us to learn about how you could potentially spend the rest of your life in your home and never pay the bank a penny more. In fact, you will be paid to remain in your home. Alternatively, you can sign up for our Louisiana Real Estate Commission licensed reverse mortgage seminar on reverse mortgages to earn CE credits if you are a Louisiana licensed real estate broker or agent.
Regardless of all its advantages, you should carefully consider getting a reverse mortgage because of its downsides:
- Since interest on the loan and fees accumulate, the balance on the loan increases over time
- Since you are using home equity to pay the loan, your heirs will have fewer assets available
- Associated fees can be higher compared to a traditional mortgage
- These types of loans can be quite costly and complex
- They can be subject to scams
- It can affect eligibility for needs-based government programs like Medicaid or Supplemental Security Income (SSI)
REVERSE MORTGAGE SERVICES IN LOUISIANA
If you are looking for Reverse Mortgage services in LA, don’t hesitate to contact Southern Title. We will ensure that your loan runs smoothly by overseeing an array of administrative duties.
Even though reverse mortgages are incredibly beneficial to seniors, they can also be rather complex, especially if you’re trying to do everything on your own, which can cost you a lot of money and stress in the long run.
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