A reverse mortgage can be a good solution for those who need extra income to enhance and extend retirement beyond the age of 62. A portion of the home’s equity is used to do this. Check out our Blog here.
If you currently have a mortgage, the payment can stop by having a reverse mortgage. However, you must maintain the house and still pay the insurance and taxes. A reverse mortgage also enables you to access additional equity money above the mortgage balance, whereas; cash is not always available in the home equity.
Convert the hard-earned money that has built you equity in your home with a reverse mortgage. And some of the equity may be tax-free cash.
Reverse mortgage eligibility requirements:
Advantages of a Reverse Mortgage
Get money from the home equity which is typically tax-free.
The primary role of a reverse mortgage is to turn a portion of the equity built in the home and turn it into cash that can be used for various needs. The loan proceeds can come in a line of credit, a lump sum, a monthly cash flow payment or a combination of all. If a line of credit is chosen, there may be the option to pay it down, increasing your equity and giving you less cash.
Eliminate monthly mortgage payments.
Reverse mortgages do not require the borrower to make a monthly payment during their lifetime as long as your follow the guidelines: stay in the home, pay taxes and home insurance and maintain the, you will not be required to make a monthly payment during your lifetime as long as you maintain and live in the home, and pay taxes and insurance. However, HOA fees will need to be paid if applicable).
The amount you owe will never be greater than the homes worth.
If the borrower moves out of the home permanently, the house is sold, or the borrower passes away, the heirs and the estate are not required to pay the deficit if the balance owed exceeds the home’s value. If the heirs want to keep your home, it can be purchased for 95% of the current appraised value. In certain situations, the loan may mature, and the balance will become due and payable. The borrower’s age, property, and limited debt will be considered to qualify. Rates, fees, and terms can vary state by state and are subject to change.
From age 62 to 65 the Medicare gap can be bridged.
When seniors cannot afford to pay for health insurance before the age of 65 when Medicare begins, they generally delay their retirement until 65 as well. Funds received from a reverse mortgage can help you to avoid paying income tax on money drawn from IRA’s and other accounts that will penalize you for early withdrawals of cash. You will be able to keep your current assets in tact without having to diminish them.
A reverse mortgage enables you to pay for long-term care expenses.
As we age, the need for long-term care can happen in a blink of an eye. Money received from a reverse mortgage can help in purchasing long-term care insurance to handle expenses without losing your home in the process
Types of Reverse Mortgage
Conversion Mortgage (HECMs)
HECM, Home Equity Conversion loans are federally-insured reverse mortgages backed by the U. S. Department of Housing and Urban Development (HUD). These loans enable you to withdraw a portion of the home’s equity to be used for any payment needs and purposes. However, the borrowed loan amount depends on certain factors such as age, type of reverse mortgage, home appraised value, current interest rates, the borrows financial assessment, ability to pay the loan, property taxes and homeowners insurance.
Conversion Mortgage for Purchase (H4P)
An H4P loan is a type of HECM backed by the FHA. This loan enables a senior to obtain a reverse mortgage to purchase a new primary residence in one transaction. The borrower can get cash on hand to pay the differences between the NECM proceeds, the home’s sale price and closing costs. This loan can allow a senior to build a new home to relocate closer to family and friends, purchase a home in a senior community, downsize for easier maintenance, or move into a more accessible home with amenities that best suit their needs.
A proprietary reverse mortgage works the same as most Home Equity Conversion (HCEM) reverse mortgages, whereas the homeowner gets a line of credit up to the home’s assessed value; however, they are not federally insured. This mortgage is a type of reverse mortgage that enables a senior homeowner to access money from their home’s equity through a private lender. They sometimes are called jumbo mortgages because the homeowner is seeking a loan valued above the limit set by the Federal Housing Administration (FHA).
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