Long considered a financing solution of last resort for retirees in need of additional capital to meet their income needs, reverse mortgages are getting a second look from financial planners as a viable planning tool. Not long ago reverse mortgages were frowned upon for their high costs and the additional risks that placed retirees in a precarious position with their homes and their financial position. Much of that has been alleviated through reforms introduced by the Federal Housing Authority (FHA), clearing the way for a fresh look at the product. While it is still considered by many to be a last-resort option, for house-rich, cash poor retirees, a reverse mortgage offers a lot of flexibility for meeting income and other planning needs.
How a Reverse Mortgage Works in North Carolina
As the name implies, a reverse mortgage is the opposite of a conventional mortgage in which payments are made towards a loan used to purchase a house. Instead, a reverse mortgage makes payments to the homeowner using the equity in the house. Whereas a conventional mortgage requires the homeowner to make principal and interest payments to eventually own the home. A reverse mortgage pays the homeowner a portion of the home’s equity and the interest accrues against the total equity to be repaid when the homeowners leave the home.
- While there is no credit qualification, at least one of the homeowners must be 62 and they must have a certain amount of equity in the home.
- Most lenders require at least 50% equity in the home.
- They also must demonstrate the ability to make property tax and insurance payments.
- The amount they can borrow is based on their ages, the interest rate and the amount equity in the home; the older the borrower, the more he can receive.
Homeowners can access their equity through monthly payments, as a lump sum, or as needed through a line of credit (LOC). They are not required to repay the loan because it is not repaid until they leave the home and the property is sold. However, an LOC can be repaid, replenishing it for future use. The other advantage of an LOC is that the credit limit actually increases each year as the home value increases.
Repaying the Loan
The major appeal of a reverse mortgage is it never has to be repaid. The loan is paid off when the last homeowner leaves, whether for another home or upon their death. Because they are nonrecourse loans, if the value of the home decreases, neither the homeowner nor the estate is responsible for any shortfall. If, after the loan is settled, there is still equity, it belongs to the homeowner.
Rates and Costs
Generally, the closing costs and interest rates on a reverse mortgage are higher than a conventional mortgage. Like conventional loans, if you want a lower interest rate, you will pay higher closing costs in the form of points. Where a typical conventional mortgage interest rate might run around 4% depending on your credit score, a reverse mortgage can run as high as 5.5 or 6%.
Best Uses of a Reverse Mortgage in NC
The funds from a reverse mortgage can be used for any purpose – renovation, to buy another home or to supplement their income. While it is still used as a last-resort source of income for some retirees, others utilize it as a flexible financial planning tool. For instance, some retirees access the funds so they can delay their Social Security benefits until age 70 when they will receive a much higher benefit. Some have used it to enable them to convert their 401(k) or IRA to a Roth IRA for more favorable tax treatment of their withdrawals. Others use the funds to offset declines in their income due to stock market declines.
Know the Risks and Think it Through
There are still risks and costs with a reverse mortgage that have to be factored into their use. If you can’t make the property tax or insurance payments, you risk foreclosure. Once you start reverse mortgage payments, the equity can’t be used for any other purpose. So, while they offer some planning flexibility, a reverse mortgage can also eliminate some flexibility. So, it is important to carefully think it through with a financial planner.
Leading Reverse Mortgage Companies in NC
|Lender||Loans||Total Principal Limit|
|AMERICAN ADVISORS GROUP||1845||320822062|
|ONE REVERSE MORTGAGE LLC||1730||297528658|
|RBC CENTURA BANK||1533||175984301|
|SIDUS FINANCIAL LLC||952||162147501|
|FINANCIAL FREEDOM SENIOR FUNDING CORP||870||120185755|
|BANK OF AMERICA||864||175670765|
|HARVARD HOME MORTGAGE INC||586||98126500|
|LIBERTY HOME EQUITY SOLUTIONS INC||544||105363868|
|METLIFE BANK NATIONAL ASSOCIATION||526||113982181|
|REVERSE MORTGAGE SOLUTIONS INC||351||67223050|
|GENERATION MORTGAGE COMPANY||329||68598460|
|WENDOVER FINANCIAL SERVICES CORP||306||25541525|
|PROFICIO MORTGAGE VENTURES LLC||255||52656925|
|REVERSE MORTGAGE USA INC||232||34603180|
|FINANCE OF AMERICA REVERSE LLC||222||46518225|
|GATEWAY BANK MORTGAGE INC||213||53191913|
|HOMEOWNERS MORTGAGE ENTERPRISES INC||199||40562190|
|Lender||Loans||Total Principal Limit|
|AMERICAN ADVISORS GROUP||1696||295046462|
|ONE REVERSE MORTGAGE LLC||818||143171733|
|LIBERTY HOME EQUITY SOLUTIONS INC||523||100264668|
|REVERSE MORTGAGE SOLUTIONS INC||313||60633050|
|PROFICIO MORTGAGE VENTURES LLC||230||47036725|
|FINANCE OF AMERICA REVERSE LLC||195||42205725|
|REVERSE MORTGAGE FUNDING LLC||192||51223622|
|GATEWAY BANK MORTGAGE INC||191||47917213|
North Carolina Reverse Mortgage Interest Rates
|Date||Fixed Rate||Adjustable Rate|
Top Cities in NC by All Time HECM Loans Originated
ACTION PATHWAYS, INC
316 GREEN ST, FAYETTEVILLE NC 28301-5028
ALLIANCE CREDIT COUNSELING, INC.
10720 SIKES PL SUITE 100, CHARLOTTE NC 28277-8141
CCCS OF FORSYTH COUNTY, INC. – MAIN OFFICE
8064 NORTH POINT BOULEVARD, SUITE 204, WINSTON SALEM NC 27106-3116
CCCS OF GREATER GREENSBORO
315 E WASHINGTON ST, GREENSBORO NC 27401-2911
CCCS, A DIVISION OF TRIANGLE FAMILY SERVICES, INC.
3937 WESTERN BLVD, RALEIGH NC 27606-1936
CENTRE FOR HOME OWNERSHIP & ECONOMIC DEVELOPMENT CORPORATION
105 W. CORBIN STREET, SUITE 103, HILLSBOROUGH NC 27278-2192
CONSUMER CREDIT COUNSELING SERVICE OF WNC, INC. DBA ONTRACK FINANCIAL EDUCATION & COUNSELING
50 S FRENCH BROAD AVE STE 227, ASHEVILLE NC 28801-3271
CONSUMER EDUCATION SERVICES, INC
3700 BARRETT DR, RALEIGH NC 27609-7213
CREDIT CARD MGMT SVCS, INC D/B/A DEBTHELPER.COM
40 WESTGATE PKWY SUITE 1, ASHEVILLE NC 28806-3867
DURHAM REGIONAL FINANCIAL CENTER DBA DURHAM REGIONAL COMMUNITY DEVELOPMENT GROUP
2634 DURHAM CHAPEL HILL BLVD STE 214, DURHAM NC 27707-2831
FOOTHILLS CREDIT COUNSELING, INC.
709 W MAIN ST SUITE A, FOREST CITY NC 28043-2820
JOHNSTON-LEE-HARNETT COMMUNITY ACTION, INC
1102 MASSEY ST, SMITHFIELD NC 27577-4951
NAVICORE SOLUTIONS- RALEIGH, NC
4917 WATERS EDGE DR SUITE 240, RALEIGH NC 27606-5416
NORTHWESTERN REGIONAL HOUSING AUTHORITY
869 HWY 105 EXT. SUITE 7, BOONE NC 28607-4958
PROSPERITY UNLIMITED, INC
1660 GARNET ST, KANNAPOLIS NC 28083-6667
RESOURCES FOR SENIORS
1110 NAVAHO DR SUITE 400, RALEIGH NC 27609-7352
SALISBURY COMMUNITY DEVELOPMENT CORPORATION
1400 WEST BANK STREET, SALISBURY NC 28144-3912
SANDHILLS COMMUNITY ACTION PROGRAM, INC.
340 COMMERCE AVENUE, SUITE 20, SOUTHERN PINES NC 28387-7168
(910) 947-5675 ext 25
5560 MUNFORD ROAD SUITE 109, RALEIGH NC 27612-2635
WESTERN PIEDMONT COUNCIL OF GOVERNMENTS
1880 2ND AVE NW, HICKORY NC 28601-5766