There is no doubt that any homeowner (or any person) will tell you that they could use more money. Whether you are planning a remodel, need to catch up on bills, or simply want some extra cash in your pocket, a reverse mortgage is a viable option worth considering. But before making that decision, it is important to ask yourself a few questions! We’ve compiled four questions to ask yourself as you begin to consider a reverse mortgage.
- Who is eligible for a reverse mortgage?
The first step in considering a reverse mortgage is finding out if you qualify. Reverse mortgages are specifically designed for homeowners who are 62 years of age or older and have a sizeable equity in their home. So if you’re under 62, put this information in your back pocket and come back in a few years!
- What is a reverse mortgage?
Simply put, a reverse mortgage is a loan that pays you the equity in your home without monthly loan payments. Equity is borrowed against the value of the home and delivered to the homeowner in the form of a loan. The current value of the property, the balance of the existing mortgage, and interest rates are all taken into consideration.
- How do you receive payments?
Reverse payments are unique in that you choose the way you receive your funds. There are a few common ways people choose to be paid such as a lump sum (receiving all proceeds at once), equal monthly payments, term payments (equal monthly payments for a set amount of time), or a line of credit that allows you to borrow money as you need. With a reverse mortgage, you’re able to choose the payment option that best suits your current financial situation and needs.
- What happens if I sell my home or I pass away?
In the unfortunate event that you pass away or if you sell your home, the entire loan becomes due. But there are ways to protect you and your children or beneficiaries. Federal regulations exist that require your lender to structure the loan so that the amount doesn’t exceed the value of your loan. This means if you or your beneficiaries sell the home, the proceeds for the sale will pay for the loan.
In some cases, your beneficiaries may have to pay the difference on your loan. In most cases this happens if the value of your home decreases over time or if the loan amount exceeds the value of your home over time.
For the right homeowner, there are many benefits of a reverse mortgage that put money back in your pocket. Three key benefits are: you only pay interest, not principal payments; loan payments are not taxable since the payments are considered an advance on the loan, not income; and you keep the title of to your home.
Any decision about your home is a big decision, and we’re here to help! Contact us today to find out whether or not a reverse mortgage loan is right for you.