Learn what is a Reverse Mortgage? Will it work for you and your family?
With home values decreasing, retirement savings down, government benefit programs threatened and people living longer, many seniors are concerned about being able to finance the remainder of their lives. Even with diligent retirement planning many seniors face unexpected financial burdens. The vast majority of their wealth is tied up in their home equity. Tapping into that equity may be the best solution to pay for the additional expenses and increase their monthly cash flow. What is a Reverse Mortgage? A Reverse Mortgage is a great financial tool that allows them to do just that.
What is a Reverse Mortgage?
A Reverse Mortgage is a loan that is available to people over the age of 62. It enables the borrower to convert part of their home equity into cash. It is called a reverse mortgage simply because it is like a traditional mortgage but reversed. Instead of making payments to the lender, the lender makes payments to the borrower. The loan balance does not have to be repaid until the property is sold, borrower moves out or otherwise vacates the property. As long as the borrower lives in the home as their primary residence they are not required to make any payments, they just need to remain current on their property taxes and homeowners’ insurance.
Will it work for you?
If you don’t plan to move, can afford the cost of maintenance of your home, want to access extra cash to improve monthly cash flow and eliminate your existing mortgage, then this loan will work for you.The loan process has very little out of pocket expenses, loan fees and remaining balance of your traditional mortgage can be paid using the reverse mortgage proceeds. Only out of pocket outlay would be the cost of the appraisal, which is a couple hundred dollars. You are also expected to complete a counseling session that is usually free. You can find more information regarding the mandatory counseling on the U.S. Department of Housing and Urban Development website.
How much can you get?
The basic rule of a reverse mortgage is that the older you are, the more valuable your home, the more money you can get. You can collect your payment as a lump sum, fixed monthly payments, line of credit or a combination. There are no restrictions on how you want to spend your cash. You will never own more than the value of your home in a reverse mortgage loan, regardless of how much you borrow. If a balance is less than value of your home at the time of repayment you or your heirs get to keep the difference. The borrower will always retain the ownership of the home. Lender never owns the home even after the last surviving spouse vacates the property.
A Reverse Mortgage is no longer a last resort for cash-strapped homeowners. They are now a great planning tool for a comfortable and stress free retirement.