For Retirees On the Go, Your Primary Residence Holds the Key to a Reverse Mortgage Loan
It’s no secret that retirees are living longer and healthier lives than ever. In fact, the Social Security Administration estimates that “a quarter of 65-year-olds will hit age 90, and one in 10 will live beyond age 95.” For those that didn’t take into account a protracted timeline, it could mean rethinking their retirement strategies.
One tool more seniors are turning to is a Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage. These loans allow an individual age 62 or older to turn their home equity into a lump sum, monthly payments or even a line of credit, as long as their home remains their primary residence.
Wondering what the term “primary residence” means and if you qualify? Let’s dive in.
A HECM Covers Only Primary Residences
Plenty of seniors plan to take well-deserved vacations in retirement for weeks (or even months) at a time, and a HECM is still possible for frequent travelers. As long as your home is your primary residence and isn’t a vacation home, rental property, or second home, it qualifies for a reverse mortgage. Note that if you move out of your primary residence permanently for more than one year for health issues, it could result in the loan becoming due.
So how do servicers determine your primary residence?
Keeping the home’s address as your mailing/billing address is crucial. Every year, the servicer will send an Attestation of Compliance (AOC) to borrowers to determine that the home is still a primary residence. Borrowers need to sign and return this paperwork within a fixed timeframe; if the servicer doesn’t receive the forms, an inspection must occur to physically verify that the home is occupied, which costs money the borrower will have to pay.
What happens if I want to go away for a while?
If a borrower is going on vacation for an extended period of time (months), they should communicate with the servicer and supply an alternate contact or alternate method for the servicer to reach the borrower. It is important that any mail or communications from the servicer to the borrower be attended to in a timely manner.
Assuming your property qualifies, there are other considerations to keep in mind when deciding if a reverse mortgage is right for you. The home will need to be appropriately insured, maintained, and the property taxes paid in full throughout the term of the loan. Whether 62 is just around the corner or has already arrived, Open Mortgage can make sure you’re asking the right questions.