If you’re a senior homeowner who needs extra cash for house repairs or other expenses, you may benefit from a reverse mortgage.
Reverse mortgages are designed with seniors in mind
Reverse mortgages were designed for homeowners age 62 or older who want to supplement their income or pay healthcare expenses.
There are three types of reverse mortgages available:
- Single-purpose
- Home Equity Conversion Mortgage (HECM)
- Proprietary
With reverse mortgages, there is no required minimum credit score. Talk to your lender about which might best suit your needs. After applying, you have the right to cancel the deal for any reason. To do so, submit the request to your lender in writing.
Reverse mortgages allow homeowners to borrow against the value of their home
If a senior homeowner needs cash, but their net worth is tied up in home equity, a reverse mortgage allows you to borrow against the value of your home. Reverse mortgages aren’t cash-out refinances!
With a reverse mortgage, the homeowner isn’t required to make any monthly loan payments. Remember that because you’re borrowing against the value of your home, it will use up the equity in your home, leaving fewer assets for you and your heirs.
When taking out a reverse mortgage, there will be costs like lender fees and closing costs.
Reverse mortgages become due when the homeowner dies or moves out
Though homeowners with a reverse mortgage have no monthly loan payments, that doesn’t mean they’re off scot-free. If the homeowner moves out of the home permanently, sells it, or dies, the entire loan balance becomes due.
This fact is essential to understand if your heir wishes to sell the home after they’ve inherited it. The agents at Merchant of Homes can help you sell inherited properties with a reverse mortgage on them.
Talk to your lender before applying for a reverse mortgage
Like all programs, what is suitable for one person may not be right for another. Always talk to your lender about the pros and cons of a reverse mortgage before applying. They will review your situation with you and help you understand if it’s in your best interest.
Be wary of sales pitches that make a reverse mortgage out to be the solution to all your problems. If you don’t understand the costs or features of this type of mortgage and feel pressured, walk away.
If you suspect fraud, report it to the authorities.