Deciding if a reverse mortgage loan is right for you can be tricky, so we’re here to break down what they are, who they benefit and if you think one is right for you.
Who it benefits?
A reverse mortgage is most likely to benefit seniors looking to supplement a fixed income, during retirement. It’s also likely to benefit thos who need a home equity line of credit, but don’t qualify. It’s great for seniors who will remain in the home for a long time to come, and those looking to use the reverse mortgage as a financial tool for retirement planning.
You must be 62 or older, own your home and use it as your primary residence. The property must be a single family, multi-family or an approved condominium or manufactured home. You must own the home outright, or have a very small amount left to pay on the existing mortgage. Your home must also be in good condition. In order to be approved for a reverse mortgage you will have to go through certain financial assessments.
What is it?
A reverse mortgage is for homeowners 62 or older, that have accumulated home equity. It’s for homeowners who want to use this equity as a supplement to retirement income. A reverse mortgage is also known as the Home Equity Conversion Mortgage or HECM. With a reverse mortgage, borrowers are still responsible to pay taxes and insurance on the home property, but there are no monthly mortgage payments to make. Homeowners must continue to use the property as their primary residence for the life of the loan.
How does it work?
When you’ve purchased a home with a mortgage, as time goes on you gain equity in your home, as you pay off your mortgage. Equity is the difference between your home work, what value it’s appraised at and any debt you have against the home, like a mortgage. If you’re eligible, a lender can offer a fixed monthly payment to you that’s based on how much equity you have in your home.
The amount of the monthly payment is dependent on how old you are, how much equity is in your home and the current interest rates. If you’re older, you’re more likely to borrow more. If your home has more equity and therefor value, you’ll likely be able to borrow more. When interest rates are lower, you’ll be able to borrow more.
Talk to your local Bend Oregon Real Estate Broker and learn more about reverse mortgages. If it seems like it’s something that will benefit you and your home, talk to The Garner Group and get help finding a lender to talk to.