Is a Reverse Mortgage Right for You?

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The Lowdown on Reverse Mortgage Loans...

Reverse Mortgage

If you’re 62 or older and need some extra money, you might want to consider a reverse mortgage. Also referred to as a home equity conversion mortgage (HECM), you can choose from mortgages that are and aren’t backed by the Federal Housing Administration.

These mortgages allow you to take some equity out of your home, and it doesn’t have to be paid back until you no longer occupy the property. With California property values being as high as they are, it could be an easy to add extra income to your retirement. Before you move forward with a reverse mortgage, it is a good idea to get some information.

Let’s start with the reverse mortgage process.

How a Reverse Mortgage Works

You have a basic idea of how reverse mortgages work. Still, it is a good idea to examine it a little closer so you will know if this is a good option for you and your family.

If you decide to get a reverse mortgage, you will take some of your home’s equity out. You can take it out as a line of credit or cash. You can also take it out as a monthly or lump sum payment. In addition, lenders allow you to take it out in both a credit line and a payment.

When you take out equity with other loans, you have to pay it back immediately, but that is not the case with a reverse mortgage. The lender doesn’t require any payments on the loan until you pass away or move out of the home. You can make payments if you wish, though.

Many people use the money they get from their reverse mortgages to supplement their retirement incomes. In fact, many people who are strapped for cash and have a lot of equity in their homes choose this option.

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Who Is Eligible for a Reverse Mortgage?

It is relatively easy to qualify for a reverse mortgage, but you do have to meet certain criteria.

In order to qualify:

  • You need to be 62 years of age or older.
  • You must complete HECM-approved counseling.
  • You need to own the home outright or have a low balance that you can pay off with your newly acquired funds.

You also need to have an eligible property. First, you need to live in the property. If the property isn’t your primary residence, you will not be granted a reverse mortgage.

In addition, the property must be a 1-4-unit family home, a condo, or a manufactured home on a permanent slab.

If you meet these guidelines, take the next step and see if you qualify.

Reverse Mortgage Fees

If you qualify for a reverse mortgage, you need to look at the fees before moving forward. You will have to pay the:

  • Origination fee
  • Closing cost
  • Mortgage insurance
  • Interest
  • Servicing fee

It’s important to note that you will have to continue to pay private mortgage insurance for the duration of the loan.

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Reverse Mortgage Facts – What You Need to Know

There are a lot of working parts involved in a reverse mortgage. You need to know all of the reverse mortgage facts to make a sound decision. Look through the various facts to determine if you want to move forward with a reverse mortgage. If you do, POP Mortgage is here to help.

HECM-Approved Counseling

The government wants to make sure you are prepared to take on a reverse mortgage before you get your funding. That is why you must meet with a HUD counselor prior to securing your funds. The counselor will go over your options with you and help you determine if you should apply for a reverse mortgage. While this might seem like an unnecessary obstacle, it is very helpful. You want to give a reverse mortgage a lot of consideration before moving forward. This will help you do just that.

Your Responsibilities as a Borrower

When you take out a reverse mortgage, you still have some responsibilities. First, you must stay on top of the home’s upkeep. You also have to pay the homeowner’s insurance and property taxes.

Reverse Mortgage Interest Rates

When you take out a reverse mortgage, you will likely pay a higher interest rate than you would pay with a traditional loan. Your lender will apply the interest to the loan’s balance on a monthly basis. You aren’t required to make any interest payments, but you can if you wish.

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The Loan Is Due – Now What?

There is some confusion about what you need to do when the loan comes due. Keep in mind that the loan is only due if you pass away or you move out of your home. In both instances, the loan is due within 12 months.

You or your beneficiaries can repay the loan or put the home up for sale. Then, the sale of the home will settle the outstanding balance.

Pros and Cons of a Reverse Mortgage

You’ve taken in a lot of information and you’re probably still scratching your head a bit. Should you move forward with a reverse mortgage, or should you go with something else?

Look at the pros and cons, and then you can decide.

Pros include:

  • You can continue to live in your home.
  • It’s a revolving line of credit, so you can repay and replenish it at any time.
  • It makes retirement planning easier.
  • You’ll have the money you need to pay your bills.
  • The debt isn’t passed to heirs.
  • It’s easy to qualify for.

It also has some cons, such as:

  • If you use up a lot of the equity, you won’t have as much to pass on to your heirs.
  • It has high closing costs and interest rates.
  • You will have to take care of homeowner’s insurance, real estate taxes, and maintenance.

Are you ready to move forward with obtaining a reverse mortgage? If so, POP Mortgage will be with you every step of the way. We have help people through out California with their reverse mortgage questions and needs. Get the process moving by taking our Reverse Mortgage Qualifier. Then, let an agent assist you with securing your funds.

Why a Reverse Mortgage?

A reverse mortgage pays off your existing mortgage, should you have one, by allowing you access to the home equity you’ve worked so hard to build. Any money left after paying off your existing mortgage is available to use as you see fit.

Payment Options

  • Full or Partial Lump Sum
  • Line of Credit
  • Monthly Payments
  • Combination of Any of These

You have the option to change your disbursement method at any time.

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