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Reverse Mortgages

 

A Reverse Mortgage Loan is only obtainable to homeowners who are 62 and over, to access the equity in their home. With a reverse mortgage, you can turn part of your home's equity into cash. Reverse mortgages are designed to help those that qualify with limited income, that do qualify, use the equity in their home to supplement for living expenses or medical bills. There are no limitations on how the proceeds of the loan may be used.

No monthly payments are made to the lender with a Reverse Mortgage. The lender makes disbursements to the borrower. The money you obtain, as well as interest on the loan, raises the balance of your loan each month.

Reverse Mortgage
 

Reverse mortgages are simple to qualify for because there are no income or credit requirements. You must live in your home, be at least 62 years old, and have a low loan balance or no traditional mortgage.


 

Traditional Mortgage vs. Reverse Mortgage

A traditional mortgage is used when you purchase a home or refinance. This requires paying back the lender over time. Reverse mortgages are allowing you to borrow against your home. With a Reverse Mortgage, there are no monthly payments. A traditional mortgage, in which equity rises while the loan balance decreases. The opposite is true with a reverse mortgage.

Home Equity Loan vs. Reverse Mortgage

Reverse Mortgage Benefits

Many people compare reverse mortgages to a second mortgage or HELOCs. The main variance is a home equity loan is paid back in monthly installments. There are strict income and credit requirements for home equity loans, whereas reverse mortgages are accessible as long as certain requirements are met. There are no requirements to do with credit-worthiness or income.

A reverse mortgage is allowed a higher max loan amount. The maximum loan amount with a home equity loan is typically 20% of the equity in the home and requires a specific amount of equity in the home at present. Certain factors, including the age of the borrower and the type of reverse mortgage, will determine the amount of the reverse mortgage.

 

Reasons to Get a Reverse Mortgage

There are many reasons homeowners elect to acquire a reverse mortgage. Below are some of the most common reasons.

Comfortable Retirement

Most homeowners who are arranging to retire have spent three decades or more making monthly mortgage payments. This mortgage amount could be a few hundred to a few thousand every month. This mortgage payment may be gone after retirement, but you probably have regular monthly expenses, like insurance, which are due monthly. Reverse mortgages allow retirees to increase their fixed income further than Social Security, a pension plan or a retirement account for more cash. This can help increase their quality of life, to pay bills and other living expenses.

Reverse Mortgage Benefits
 

Pay Medical Bills with Reverse Mortgage

The reality of growing older is medical expenses increase. The cost of healthcare is rising in the United States, and many retirees find medical expenses place a great burden on their fixed income. Medical bills, cost of prescription drugs and continuing medical treatments are common motives for obtaining a reverse mortgage.

Make Home Improvements with A Reverse Mortgage

A reverse mortgage allows homeowners to make modifications to their home in a way that will better suit them for the next stage of their life. This includes expanding the kitchen, making hallways wider or bathroom remodeling.

Funds Received From  Reverse Mortgage To Pay Off Debt

Most Americans want to go into retirement debt free. If you are entering your retirement with debt, a reverse mortgage can be used to pay it off once and for all to reduce your monthly obligations.

 

Example of a Reverse Purchase Loan

Explanation of Home Equity Conversion Mortgage (HECM) and How It Works

John is 71 and wants to live closer to his family. His current home is valued at $300,000, and the purchase price is also $300,000. He does not want to pay monthly mortgage payments.

John uses the proceeds from an HECM for the purchase loan of $162,600 and makes his down payment of $152,273 to close the loan and purchase his new home. He will have no monthly mortgage payments.