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October 16, 2020 • 3 minutes
Reverse mortgages actually have 4 big benefits, all helping you with retirement!
1. No More Monthly Mortgage Payments: If you have an existing mortgage on your home, then part of your reverse mortgage loan amount will be used to completely pay off that loan.
The good news here is that this means NO MORE monthly mortgage payments. Just think what you can do with that money! This is not a one time infusion of cash, this is an ongoing monthly improvement to your budget! Yippee!
2. You Own Your Home: When you get a reverse mortgage, you still own your home. Even though you are borrowing some of your home equity, you will be able to do anything you want with your house and live there as long as you please.
3. Flexibility: With a reverse mortgage, you are only borrowing a fraction of your home’s value. This leaves you with more financial flexibility for the future.
These reserves give you access to additional options to use more money later, whether it means downsizing, relocating or potentially leaving an estate to heirs. Your equity reserve is the amount of money you still have in home equity. This can be a valuable source of security for your future.
4. Cash: Most reverse mortgage borrowers also get access to cash (or a home equity line of credit). You can use this money any way you want. And, it can be exciting to see how much money you can get from a reverse mortgage!
(Just remember that the other benefits of these loans may be of greater long term value to you than the cash you get up front.)
The amount of home equity you can access through a reverse mortgage generally starts at about 40% of the value of your home at the earliest age you are eligible for this product — 62. As you get older, the percentage you qualify for increases.
Your loan amount is determined by a variety of factors including: your age, spouse’s age (if applicable), interest rates, and the appraised value of your home (or the FHA lending limit of $970,800 — whichever is less).
There is no predicting the future — especially these days.
However, there are a few things to watch if you are concerned about how much money you can get from a reverse mortgage:
Interest Rates: If interest rates rise, loan amounts are likely to decrease. (Experts predict that interest rates will go up.)
Home Values: If your home’s value falls, your potential loan amount will likely decrease.
Politicians: Reverse mortgages are regulated by Congress and the Federal Department of Housing and Urban Development. The future of the program lies in their hands.
If you want to stay in your existing home and any of the following is true, then a reverse mortgage is worth a serious look:
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Qualifying for a reverse mortgage is relatively straightforward. There are age, type of house and financial qualifications. Find out if you are eligible.
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Often times, a reverse mortgage transaction involves refinancing an existing “forward” mortgage into a reverse mortgage. However, it’s also possible to refinance an existing reverse mortgage to achieve a different interest rate or loan terms. Is reverse mortgage refinancing a good idea? A reverse mortgage is a loan that enables homeowners aged 62 or older […]
