What is a reverse mortgage?
Any homeowner over the age of 62 can apply for a reverse mortgage. As the borrower, you must occupy the home as your primary residence. Reverse mortgages are based on your home’s equity there are no income or credit requirements.
How do reverse mortgages work?
The application process is the same as any other loan. Your current loan (if you have one) will be paid off with your new reverse mortgage, which will totally eliminate any current mortgage payment you have! If you have additional equity, you can access that cash tax-free! If your home is already owned free and clear, you can use a reverse mortgage to gain access to the equity that you have worked so hard to build up. As the homeowner(s), you can choose from one of four ways to receive the additional cash from your reverse mortgage:
- As a monthly payment
- In one lump sum amount
- As a line of credit
- Any combination of the above options.
With a reverse mortgage you don’t have to make monthly payments, so the mortgage amount you owe grows larger over time. As your mortgage increases, the amount of equity you have left after selling or paying off the loan generally grows smaller. The amount owed at the conclusion of a reverse mortgage (when you no longer occupy the home) is either the amount of the home’s value or the amount of the current mortgage whichever amount is less. Also, your home can continue to appreciate just the same as if you had a regular mortgage, increasing your equity as time goes by.
As a HECM Reverse Mortgage borrower, you continue to own your own home and remain on title, so you will still be responsible for property taxes, insurance and repairs. No repayment is required until you no longer occupy the house.
What could you do if you no longer had a monthly mortgage payment, or if you had additional cash? Whether you just want to have more money to enjoy your golden years, help support a loved one or pay off other rising bills and medical expenses, a reverse mortgage can give you immediate access to your cash. Talk to a Reverse Mortgage Banker today to learn more about how a reverse mortgage could help you.
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