As a person approaching retirement, you’re likely in need money to cover your healthcare expenses, pay off an existing mortgage, or even pay for home improvement. At this point, you may be considering getting a reverse mortgage as it allows you to get fixed monthly payments without the need to repay a loan or move. Citycreekmortgage.com notes that while this may sound easy and straightforward, it is essential to understand what reverse mortgages are and how they work.
What is a reverse mortgage?
This is a loan that allows you to get cash in exchange for your home equity. This product was invented years ago to help seniors facing hard economic times access equity in their homes. It is estimated that between 1990 and 2010, over 600,000 reverse mortgages were issued.
How do reverse mortgages work?
In the case where you purchased your home with a forward or regular mortgage, you made monthly payments to the lender and eventually built up equity in your home. In a reverse mortgage, the opposite happens. The lender now pays you on a monthly basis which means that he gradually purchases the equity in your home. The loan is now repaid when you sell the home, pass away, or when your home is not your principal residence.
Advantages of Reverse Mortgage
Reverse mortgages have many benefits.
The chance to decide how you would like the cash to be paid out to you. It can be done in a single lump sum, in a line of credit where you decide how and when your available cash gets paid out or on a regular monthly cash advance.
You also don’t have to repay as long as you live in the home as a principal residence no matter how the cash is paid out.
According to the Federal Trade commission, if you receive payments worth more than your home’s value, you’ll not owe more than the value of your property.
You still remain the owner of the home and cash advances are non-taxable.
So if you’re considering a mortgage, shop around and compare your options. There are different mortgages available in the market and your mortgage planner will be happy to explain what each mortgage requires and the features of each one.
