Family & Caregivers

Today’s retired seniors encounter a wide range of situations that younger loved ones may not understand. These situations range from how to live comfortably on a fixed income as inflation grows, to dealing with more frequent medical bills and having to let go of the physical and financial independence they once had. For others who may feel financially secure today, financial advisors continue to look at new strategies to prolong existing cash resources to deal with unexpected surprises.

The Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, is literally a life-changing strategy to help Americans access the wealth in their homes to alleviate financial stress or to prolong their existing retirement benefits, all without payment obligation or recourse.

Helping loved ones remain in the comfort of their home is often a gift above all others. We encourage you to get educated and to reach out to Norcom Mortgage. We provide free education and resources. Together with loved ones, your financial advisors, and estate planners, we identify HECM strategies that may benefit your family beyond what you ever thought possible.

A reverse mortgage offers retirees the opportunity to live safely and comfortably in their own homes, on their terms.

Aging-in-place may help enhance a senior’s quality of life by enabling them to:

1. Continue living in a familiar environment
2. Preserve their community connections
3. Feel independent
4. Reside in a home that may have emotional value for them or their children

A reverse mortgage allows those over age 55 to pay off an existing mortgage and/or to turn the remaining equity into a cash line of credit. The line can be used for anything they choose, and they will never make payments or need to repay the loan as long as they occupy it. They can receive the proceeds in lump sum, as fixed payments for as long as they live in the home, or use it as a line of credit that grows monthly, tax-free, or any combination of these options.

The amount received is based on the borrower’s age, home value and current interest rates. There are several options for use depending on the credit extended, and changes to preferences can be made at any time:

1. A lump sum (usually to pay off existing mandatory debt)
2. Monthly term payments for a fixed period
3. Tenure payments guaranteed until the home is no longer your primary residence
4. A line of credit that grows monthly and tax-free
5. Or a combination of all of the above

What happens to my inheritance?

Borrowers may “will” the home to loved ones as they wish, and heirs may still choose to sell or keep the home after paying off the loan. There are also various methods that borrowers or heirs can use to repay the loan when it’s due. The loan is non-recourse. No other estate assets are used to repay the loan, no matter the size of the balance.

Does the bank own my parent’s home?

No. Reverse mortgage borrowers retain full ownership of their homes. They are not relinquishing title or ownership using a reverse mortgage but borrowing against the value of the home. The lender and HUD will lien the home. A borrower will not lose their home under normal circumstances, as long as they continue to pay taxes, insurance, and otherwise comply with loan terms.

How do we repay the loan and how much will we owe?

The loan is non-recourse and repayment is never an obligation for heirs. The loan is repaid once the last borrower leaves or sells the home. If the home is sold, the loan is repaid, and any remaining equity goes to the heirs. Upon death, heirs have six months, and up to two three-month extensions, to sell the home at market value or to pay off the loan and retain the estate.

How is a reverse mortgage different than other loans?

No monthly mortgage payments as long as they meet the terms of the loan. Few seniors can afford mortgage payments with declining or no job income. In addition, many don’t qualify for a traditional mortgage due to either income or credit score factors. Using a reverse mortgage, they will likely qualify and there will be no principal and interest payments while they live in the home (taxes and insurance must still be paid by the borrower). As a line of credit strategy, the line grows monthly and tax-free, until used, and there is never a payment due when it’s used. Repayment is deferred until the borrower leaves or sells the home. Reverse mortgages are also non-recourse, FHA-insured loans, offering additional safeguards for seniors and their families.