Two different people have asked me in the past few weeks about Reverse Mortgages. To be completely honest, I don’t deal with too many of these transactions. Not too many Loan Officer’s do. First, they do not pay well, second, they are rather complex, and third most of the homeowners who would qualify for a reverse mortgage are not necessarily looking for any kind of financing. That being said, I am not totally unfamiliar. I have a handful of clients who have benefited from a Reverse Mortgage. Here is some information, in case you are curious.
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A reverse mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:
- All at once, in a single lump sum of cash;
- As a regular monthly cash advance;
- As a credit line account that lets you decide when and how much of your available cash is paid to you
- As a combination of these payment methods.
No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home (but it does not have to be owned free and clear) and be 62 years of age or older.
Pro’s and Con’s
As with any loan program it is important to consider the ways in which a Reverse Mortgage may or may not benefit you or your loved ones. There are several key advantages, such as the fact that the lender can, in no way, force or even encourage a home owner to sell the home in order to pay off the reverse mortgage. In addition, homeowners are allowed to remain in the property for as long as they are living, regardless of the amount of interest accrued. In spite of these benefits, there are some disadvantages that are worth considering: Unfortunately, several senior home owners have made poor decisions with the sudden influx of money that they receive, reverse mortgage scam artists are common. In addition, the costs of obtaining a reverse mortgage may outweigh the advantages—particularly if the lender is charging an higher than normal interest rate.
As always, if you have additional questions, or would like more information, please contact me at jayhart@cottonwoodmtg.com
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