While proprietary reverse mortgages have re-emerged since the 2008 Housing Market Crash, these loans are still rarely offered. Despite advancements in security and financial planning, lenders and financial planners remain concerned about scams targeting the loan’s qualified members: retirees. As a result, many retirees are left uninformed about proprietary reverse mortgages, let alone the many financial benefits they offer for retirement planning. Together, let’s look at proprietary reverse mortgages, how they work, and the benefits they can offer to your retirement savings.
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What is a Proprietary Reverse Mortgage?
Proprietary reverse mortgages are private loans offered and insured by private lenders that allow homeowners to convert part of their home equity into money. As these private loans aren’t government-insured, they’re not bound by Federal Housing Administration (FHA) lending limits and therefore allow members access to more funds without paying upfront fees.
How Do Proprietary Reverse Mortgages Work?
Often called jumbo reverse mortgages, proprietary reverse mortgages enable homeowners to access large sums of money from their home equity. Once the current mortgage is paid, any leftover funds are returned to the owner in either a non-taxable lump sum or line of credit to use as they wish. While property taxes, insurance and interest rates must still be paid, all home funds and ownership remain with the owner, leaving the withdrawal to be repaid by the property sale.Benefits of a Proprietary Reverse Mortgage
Since proprietary reverse mortgages are only qualified for members 55 or older with enough home equity from their main residence, retirees hold the most risk of having their savings targeted by mortgage scams. Yet, retirees have much more to gain by taking on a proprietary reverse mortgage than not, especially when it comes to saving for retirement. Here are some benefits retirees can look forward to by taking on a proprietary reverse mortgage:
- Larger Loan Sums: Retirees whose homes value over $970,800 can receive larger lump sums on their home equity through a proprietary reverse mortgage. In doing so, these funds can sustain not only a more comfortable retirement but supplement income to allow continued growth for stocks or Social Security benefits.
- Limitless Payment Possibilities: With the home equity funds a proprietary reverse mortgage brings, retirees have unlimited options to use these savings for retirement. A few examples include home repair, supplemental income, healthcare, a buffer for inflation rates and so much more! Retirees could potentially use such funds to extend their quality of life throughout their retirement years, leaving more money to heirs as a result.
- No Upfront Fees: As most upfront federal insurance fees cost 2% of your home equity, retirees taking out a proprietary reverse mortgage on a $100,000 home could save $2,000 to go towards their retirement financial plans. Thus, less expenses are incurred, giving more accessible income for essential items.
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Overall, proprietary reverse mortgages have more advantages for retiree finances with their payment options, spending freedom, and lack of limitations on equity funds. Using a proprietary reverse mortgage, aging homeowners not only have unlimited access to more income but are free to live out their lives at home without concern of title or property takeover.
At PCL Financial Group, our experienced team offers proprietary and various other reverse mortgage options to best suit your retirement goals. To learn more about our reverse mortgage options, contact us today to receive a professional financial consultation.
