If you are 62 years of age or older and are looking to tap the equity in your home to eliminate your mortgage, supplement your income, or pay for healthcare expenses, then a reverse mortgage may be a great option.
A reverse mortgage is a government regulated mortgage product which allows the homeowner to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills.
How exactly does it work?
A homeowner who is at least 62 years old and has considerable home equity can borrow against the value of their home and receive funds as a lump sum, fixed monthly payment, or line of credit.
Unlike a traditional or “forward” mortgage – the type used to buy a home – a reverse mortgage doesn’t require the homeowner to make any mortgage payments.
Who is the ideal candidate for a reverse mortgage?
Reverse mortgages are a great option for senior citizens looking to pull equity out of their home, and to be more financially independent. A reverse mortgage eliminates the monthly mortgage payment to make room for other things (medical expenses, vacations, outstanding bills).
The primary candidates for reverse mortgages are those in their 60s to 70s that either know they won’t pay off their loan within their lifetime, or own their home outright and need cash on hand to cover more prominent things. Ultimately, it’s a great way to revel in retirement with less apprehension.
What happens at the end of a reverse mortgage?
Unlike Conventional loans, you don’t owe anything until you die or sell the home. Reverse mortgages come to an end in one of three ways:
- You can elect to pay it back
- You can sell your home and pay it off
- When the homeowner passes away, the home is sold and the loan gets paid off and the remaining equity is distributed to the heirs of the property
Is there a downside to reverse mortgages?
The reverse mortgage loan compounds over time and grows, essentially eating away at the equity in the home. The obvious downside to this is that you are using your home’s equity while you are alive; after you pass, your heirs will receive less of an inheritance.
If you are considering a reverse mortgage, please reach out to us at (760) 930-0569 and one of our loan officers will assist you.