Are you one of the millions of seniors who are worried about the future? Let’s face it, financial security isn’t what it used to be. Safe pensions, Social Security and access to affordable health care are things that will affect us all, but many of today’s older Americans are living with uncertainty every day. That’s why American Advisors Group offers a way for you to tap into something that is secure: your home equity.
How Can a Home Equity Loan Provide Me With Financial Security.
An AAG reverse mortgage isn’t quite a loan, not in the traditional sense. It’s a way of making a passive asset work for you. The fact is, seniors have a combined $6.5 trillion in home equity available to them. Making that asset a part of your retirement planning allows you to tap into your equity in a way that gives you all of the advantages without the pitfalls.
What You Need is Options
Reverse mortgages aren’t the same as home equity loans, where you use the value of your home as security for a fixed amount of money and pay it back with interest. Reverse mortgages provide you with a cash payout every month to fill gaps in retirement income or to cover unexpected expenses. The most common type of reverse mortgage, an FHA Home Equity Conversion Mortgage (HECM), is government insured. The problem is, it also has a cap on the amount you can draw on; currently, that amount is $625,000 regardless of the assessed value.
With that type of mortgage, there are no monthly payments as long as you remain in your home. There’s also no danger of losing your home due to missed payments. The amount acquired is settled when the home is sold or the mortgage holders dies. Now, there’s an option to get a reverse mortgage for up to $6 million, depending on the home’s value. This option is not federally insured, however.
How Do You Get Paid With From a Reverse Mortgage?
There are currently six payout options for reverse mortgage holders. This allows home owners to choose a solution that fits their circumstances.
Line of Credit Option: This allows draws on an as-needed basis over a pre-determined time frame, as long as those draws don’t exceed to limit of $625,000, with interest. The interest rate is not fixed, so it can fluctuate with the market.
Lump Sum Payment: This allows the borrower to receive the entire amount in one lump sum, with any interest added to the remaining loan balance, if any. Otherwise, the debt is discharged at the end of the term.
Term Loan: Provides a monthly payout over a limited time period.
Tenure Loan: This one provides a monthly payout that extends for the life of the loan.
HECM Annual Cap Option: Allows the borrower to take any of the other loan options, but with a lifetime cap on the interest rate at 5 percent.
HECM Purchase Option: This option allows you to buy a second property, for instance, a vacation home, and make the payments using the reverse mortgage on the first.
Your home one of your most solid asset. There’s no reason why you shouldn’t benefit from home ownership in a way that’s safe for you. If you’re considering a reverse mortgage, make sure to work with a reputable lender that has been in business for a number of years and specializes in reverse mortgages.