You know your home value has soared and you probably have a ton of equity in it but what can you do with it?  If you are over 62 a reverse mortgage may be right for you.

Many Sacramento seniors are living on fixed incomes and know the feeling of being house-rich but cash-poor.  Many would like to do something about it but do not know what to do.  Maintaining your home has many challenges and can be intimidating. Retirement should be a time for enjoying life and not a time spent worrying about finances.

For seniors retirement should be a time of quality living free from worries about meeting daily living expenses, medical expenses and activities such as golf, travel and other hobbies.  A reverse mortgage is one option available to seniors. 

Reverse mortgages are becoming much more common but myths about them still circulate.  The biggest myth is that lenders can take possession of your house. This is untrue.  If the money you have received from a reverse mortgage is greater than the value of your home you cannot be forced to sell or leave your home. Additionally, you will not owe more than your home's appraised value when its sold. The loan will be paid back when the home is sold. Your heirs may either refinance and pay off the loan, or sell the property and keep the remaining funds after the loan is paid off.

Typically the older you are and the more your home is worth, the larger the amount of money you can get. Borrowers and the youngest person on the homes title or deed must be at least 62 and the home must be an owner-occupied,  primary residence to qualify. Loans are based on the property, not income or credit history. Depending on the loan, borrowers can receive tax free funds in a lump sum, as monthly income, as a line of credit, or a combination of the three. You remain responsible for home maintenance, insurance, and taxes.

A reverse mortgage, as any loan, has costs associated with them. Depending on the product, costs include origination fees, up-front mortgage insurance premiums, appraisal fees, and closing costs. Most of such costs can be rolled into the loan.

Here is some basic information on types of reverse mortgages available.  They are:

1. Home Equity Conversion Mortgage (HECM) - For single family to 4 units (with 1 unit owner occupied).  Loan amounts vary across the country.  In Sacramento and So. Placer Counties the limit is $362,790 on a single family dwelling and up to $625,500 for 4 units. These loans are federally insured through the FHA.
2. Fannie Maes Home KeeperŪ Reverse Mortgage - Loans are determined by using a formula that takes into consideration the age and number of borrowers at the time the application is made as well as the adjusted value of the property and current interest rates. 
3. Fannie Maes Home KeeperŪ for Home Purchase - This is a good option for homeowners who want to purchase a new home but not incur new monthly mortgage payments.  To see an example of how the product could work, visit the National Reverse Mortgage Lenders Assocation.   
4. Financial Freedom Cash Account Plan - This is for seniors in high-priced markets whose homes are worth more than the Fannie Mae and FHA lending limits. Theres almost no maximum home value or loan limit. They are administered by Financial Freedom Senior Funding Corporation, Irvine, CA.  They have 3 plans available - the Standard Option, the Zero Point Option, and the Simply Zero Option. The benefits vary and range from no origination fee and no closing costs, the ability to have an open-ended revolving line of credit and borrowers ability to limit the loan obligation to a stated percentage of the homes full market value.

Okay, so if you are still interested in considering a reverse mortgage there are three things to be mindful of. 

1. Avoid impacting your eligibility for programs such as Medicaid or Supplemental Security Income (SSI) if you are participating in a means-tested program by taking a fixed monthly payments rather than a lump sum pay-out;  
2. Discuss this with your family, tax advisor and attorney to determine the impact it may have on your estate plan; and
3. Take the time to carefully research reverse mortgages so see if it is right for you in your situation.