If you’re 62 or older – and want money to pay off your mortgage, supplement your income, or pay for healthcare expenses – you may consider a reverse mortgage. It allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills.
As a full service mortgage broker in Summerville South Carolina, Hiomefront Mortgages helps you take that the time to really investigate if the reverse mortgage is the right product for you. A reverse mortgage can be complicated and might not be right for you. A reverse mortgage can use up the equity in your home, which means fewer assets for you and your heirs. If you do decide to look for a reverse mortgage, Homefront Mortgages help you review the different type of products from different lenders to find the best one for you.
How do Reverse Mortgages Work?
When you have a regular mortgage, you pay the lender every month to buy your home over time. In a reverse mortgage, you get a loan in which the lender pays you. Reverse mortgages take part of the equity in your home and convert it into payments to you – a kind of advance payment on your home equity. The money you get usually is tax-free. Generally, you don’t have to pay back the money for as long as you live in your home. When you die, sell your home, or move out, you, your spouse, or your estate would repay the loan. Sometimes that means selling the home to get money to repay the loan.
There are three kinds of reverse mortgages:
Single purpose reverse mortgages – offered by some state and local government agencies, as well as non-profits;
Proprietary reverse mortgages – private loans; and
Federally-insured reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs).
If you get a reverse mortgage of any kind, you get a loan in which you borrow against the equity in your home. You keep the title to your home. Instead of paying monthly mortgage payments, though, you get an advance on part of your home equity. The money you get usually is not taxable, and it generally won’t affect your Social Security or Medicare benefits. When the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence, the loan has to be repaid. In certain situations, a non-borrowing spouse may be able to remain in the home. Here are some things to consider about reverse mortgages:
Types of Reverse Mortgages
As you consider whether a reverse mortgage is right for you, also consider which of the three types of reverse mortgage might best suit your needs.
Single-purpose reverse mortgages are the least expensive option. They’re offered by some state and local government agencies, as well as non-profit organizations, but they’re not available everywhere. These loans may be used for only one purpose, which the lender specifies. For example, the lender might say the loan may be used only to pay for home repairs, improvements, or property taxes. Most homeowners with low or moderate income can qualify for these loans.
Proprietary reverse mortgages are private loans that are backed by the companies that develop them. If you own a higher-valued home, you may get a bigger loan advance from a proprietary reverse mortgage. So if your home has a higher appraised value and you have a small mortgage, you might qualify for more funds.
Home Equity Conversion Mortgages (HECMs) are federally-insured reverse mortgages and are backed by the U. S. Department of Housing and Urban Development (HUD). HECM loans can be used for any purpose.
HECMs and proprietary reverse mortgages may be more expensive than traditional home loans, and the upfront costs can be high. That’s important to consider, especially if you plan to stay in your home for just a short time or borrow a small amount. How much you can borrow with a HECM or proprietary reverse mortgage depends on several factors:
In general, the older you are, the more equity you have in your home, and the less you owe on it, the more money you can get.
Homefront Mortgages can explain all of the specific steps and obligations of the Reverse mortgages. If you have questions or would like to apply for a Reverse Mortgage call Homefront Mortgages today at
(843) 261-6181 for a Free Consultation.