You’ve made it.
You’re thinking of retiring, and you’ve built considerable equity in your home. The financial planner, you’re working with is mapping an income stream from your investments. You sure could use a bit more capital to draw from to travel and enjoy retirement or to cover expenses.
Does any of this sound familiar? If so, a reverse mortgage could very well be the financial boost you need!
What is a reverse mortgage? Read on, and we’ll tell you everything you need to know.
A reverse mortgage is a specific type of loan. It is only available to homeowners who are 62 and older with significant equity in their primary home.
With a traditional loan, you make your monthly payment to the lender. With a reverse mortgage, the lender pays you.
Sounds pretty great, right?
You would keep the title to your home. And you would still be responsible for property taxes, maintenance, and upkeep. But you can say good-bye to that monthly mortgage payment and hello to an income boost.
With a reverse mortgage, you can borrow part of your home’s equity. How much you receive depends on a few factors—things like your age, the current interest rate, and the home’s value.
The greater the equity in your home, the more you will get. The older you are, the more you will get. On a reverse mortgage, you will never owe more than what the home is worth.
Converts a portion of home equity into cash with no monthly mortgage payments*
Majority of reverse mortgages are HECMs (Home Equity Conversion Mortgage, a federally insured program)
*Taxes and insurance must still be paid on time. Any costs to keep up property maintenance must still be paid. Failing to meet these requirements can lead to default.
Do you have a question about our process of getting a new home purchase loan? Learn more below, or feel free to contact us. We look forward to hearing from you!
A reverse mortgage turns your home’s equity into a payment to you, like an advance payment on your home equity.
Want to know the best part? Reverse mortgages are usually tax-free. And, it shouldn’t affect your Medicare or Social Security Benefits.
Generally speaking, you won’t have to pay back the money as long as you live in your home. That is to say, you won’t make any payments until you die or decide to move out.
Reverse mortgages have many advantages.
For starters, you don’t need to make monthly payments toward the loan balance.
Proceeds can be used for anything at all, from paying medical bills to living your best life. And there is no penalty for pre-payment.
Your spouse can remain in the home after you die, even if she’s not listed as a borrower.
And, if you are facing foreclosure, you could use a reverse mortgage to pay off the existing mortgage. You are essentially stopping the foreclosure from happening.
One other benefit of a variable rate reverse mortgage is the growth of the available credit line. This is beyond the purpose of this writing. However, it should be explored as it could be a valuable tool in “Long Term Care” planning.
You see, not everyone has access to the many benefits of a reverse mortgage. It is a loan reserved only for people who meet the following criteria.
If this is you, then there is great news! Your chances of being approved for a reverse mortgage are excellent.
But we still have more to share with you about this wonderful option.
One of the many benefits offered is that you can use the funds any way you see fit.
Some people get reverse mortgages because they need financial assistance, while others want to take a trip or add to their homes.
Here are some popular ways people 62 and older decide to get reverse mortgages.
This is true for the federally-backed reverse mortgages, called HECM’s. Let’s have a quick look at the three types of reverse mortgages.
You have three options: Single purpose, proprietary, and federally-insured.
Single-Purpose Reverse Mortgages are the least common: state and local government agencies and non-profits offer this product.
This type does have restrictions on usage. You can use it for a specific job, like a remodel or addition.
Proprietary Reverse Mortgages are private loans and are not backed by the government.
You can often get a larger loan advance using this type. This is doubly true if you have a home that is highly valued.
Federally-Insured Reverse Mortgages are also called Home Equity Conversion Mortgages. HECM’s are the most popular. While they have higher upfront costs, there are no restrictions on usage.
They are widely available from many Federal Housing Administration (FHA) Lenders. Borrowers must also receive HUD-approved counseling prior to application.
Blake Mortgages is proud to offer HECM’s to our clients. The primary benefit of a HECM is that it eliminates a monthly mortgage payment. Interest accrues on the principal, and you don’t have to pay it back until you die or move out of the home. The bank cannot touch your home’s equity, and there is no recourse other than the property.
Meaning, the lender can’t go after family members because there is no equity left by the end of the loan’s life or even if it exceeds the value of the home.
That’s right. There are still more advantages to tell you about. If you obtain a reverse mortgage, the following consumer protections are now guaranteed.
Now that you’ve completed our crash course – What Is A Reverse Mortgage – does this type of loan sound like something you and your family might benefit from?
Let’s talk! We’d love to hear from you. Whether it’s a reverse mortgage or one of our other lending options, we can help.