A reverse mortgage is a home equity loan directed specifically at elderly homeowners. A reverse mortgage can assist retirees in order to improve their cash flow, afford larger purchases, or manage unexpected expenses.
With a reverse mortgage, monthly payments aren’t necessary. Rather, the bank makes payments for you, which are taken out of your home equity. The loan is paid off once the borrower passes away, sells the home, or moves permanently.
With a reverse mortgage, you can also never owe more than the value of the home. Additionally, if there is equity left over after the loan is repaid, you or your heirs will be able to keep the difference.
Reverse mortgages are specifically targeted for those over 62. If any of the following apply to you, you may be a good candidate for a reverse mortgage:
- You own your home outright or have a small mortgage.
- You’re not planning to move anytime soon.
- You can afford regular home maintenance costs.
- You could use the loan either to supplement your monthly income, pay off your existing mortgage or debt, or pay for unexpected expenses.
Factors such as your age, the value of your home, and the interest rate will affect how much of a home equity loan you will be entitled to. Generally, the older you are, and the greater the value of your home, the bigger the loan you will be able to get.
The way you receive your money depends on the type of mortgage you have. Those with an adjustable or variable rate mortgage can collect monthly payments as a lump sum, fixed monthly payment, or a line of credit. Fixed rate mortgages are less flexible and can be collected as a lump sum.
There are, however, other fees associated with a reverse mortgage, such as closing costs, homeowner’s insurance, and maintenance fees. It’s essential that you know you are able to afford these fees before getting a reverse mortgage.
There are many benefits to a reverse mortgage, such as improving your cash flow, a lack of monthly payments, and the ability to use the money to pay off your existing mortgage. Fees and closing costs, however, can be high, and a reverse mortgage can also interfere if there is a wish to keep the home in the family. If you are considering a reverse mortgage, it’s best to seek the help of a mortgage professional to determine whether or not a reverse mortgage is the right choice for you.
Contact our experts at Northwood Mortgage™ today for a consultation!