Retirement is known as the “golden years” but for many this may mean financial stress. What if your home could actually help you take back control of your retirement finances so you can live that exciting and stress-free life you have always dreamt of? This is exactly why the Reverse Mortgage program was created, to help those who are over the age of 62 achieve financial freedom.
Currently, thousands of people are turning the age of 62 every day in the United States, and many are capitalizing on the benefits of a Reverse Mortgage to enhance their financial situation.
For those who are eligible, a Reverse Mortgage may be able to eliminate your mortgage payments, provide you access to the equity in your home, enable you to obtain a new mortgage so you can sell and downsize your current home, or even allow you to purchase that more expensive home of your dreams in your ideal location.
How it works is that the monthly payments normally paid by you are added to the loan balance, which may decrease the amount of equity that you as an owner have in the property. Here are some different ways that you can take advantage of a Reverse Mortgage to help with retirement. After we discuss these, we will go over some misconceptions about the program.
Eliminate Mortgage Payments
A Reverse Mortgage, also known as a Home Equity Conversion Mortgage (HECM), can allow you, if you are over the age of 62 years old, to refinance your current mortgage and replace it with a Reverse Mortgage. When we say that it allows you to have no monthly mortgage payment, we are referring to Principal and Interest payments. You will still however have to pay for things such as maintenance, property taxes, insurance, and any homeowners association fees.
A large factor for being able to take advantage of a Reverse Mortgage, is that there will need to be significant equity in your property to qualify for the elimination of mortgage payments.
Access Home Equity
Many homeowners tend to have significant equity in their home when entering into retirement. Strict mortgage guidelines and declining income often times makes it very difficult to access home equity.
This is why a Reverse Mortgage is a common solution used to access that much needed equity which has accumulated in a property. The equity may be used any way you wish and there are a few ways to access it, one is by a line of credit to only use when needed, the other is through a lump sum payout, and last main option is through installments over a set period of time.
Downsize Your Home – Increase Retirement Savings
Another common thing many people do as they go into retirement is downsizing their home. Once again, there can be many factors that may cause roadblocks in qualifying for a new traditional mortgage, such as future job expectancy, credit scores, and income. In addition to this, a traditional mortgage will still require a monthly mortgage payment even if you buy a smaller house. If you plan to pay cash, that may still be a large chunk of money to have to part with as you are going into retirement years.
With a Reverse Mortgage purchase loan, you may get the best of both worlds. Not have to pay all cash, and not have a monthly payment. If needed, you can also take advantage of the limited credit and income requirements for qualification.
By downsizing and using a Reverse Mortgage for the new purchase, many borrowers then have extra cash left over from the sale of their home allowing them to increase retirement savings and not have a monthly payment at the same time.
Purchase a Dream Home with No Mortgage Payments
On the flip side of downsizing, a Reverse Mortgage may even allow you to buy that more expensive property you have always dreamt of with while still not having a monthly mortgage payment. You may be wondering, how is this possible?
A Reverse Mortgage requires you to have a certain percentage of equity in a property to qualify for the program. All you need to know is the exact amount of cash needed from you to qualify for the Reverse Mortgage and home purchase, then you should be good to go. The amount you may have to put down on the new purchase could be anywhere from 50% – 65%, but it may be a lot better than having to pay 100% of the purchase price with cash.
But I Hear Reverse Mortgages Are Bad!
It is true, Reverse Mortgages used to be bad, but they are now heavily regulated and there are a lot of protections for the borrower and homeowner.
Some people think that the lender owns the home, this is not true and you are still the registered owner just like on a traditional mortgage. You retain full title, ownership, and you may sell your home at any time to pay back the mortgage.
Another concern we hear is that heirs or children will be stuck with the loan. Just like any traditional mortgage, any equity belongs to the owner. The kids or heirs are able to sell the home, or just pay off the loan in full with cash or a traditional mortgage if they want to keep it.
Some people think that only low income seniors can qualify, or that this program is not for everyone. This is not true and anyone who has the equity and follows the other qualification rules can take full advantage. There are many strategic ways this program is very helpful for anyone over the age of 62, and it can be a key part of retirement planning.
The last common concern is that, if a homeowner ends up owing more than the home is worth then the bank will take the house. The standard Reverse Mortgage program has an insurance policy associated so that you are protected if something was to happen and you owed more than the home is worth. Also, you will not be obligated for owing any extra money because of this.
If you are over the age of 62 and have built up home equity over the years, you may be able to utilize a Reverse Mortgage in many different ways.
Reverse Mortgages are a specialty and many other mortgage companies and mortgage lenders are not fully proficient in this mortgage product. We have Reverse Mortgage specialists who are here to help
guide you and answer any questions you may have. If you are interested in a Reverse Mortgage and would like to find out more about this program, please do not hesitate to reach out to us for a free evaluation.
The benefit of using a mortgage company like West Coast Mortgage Group is that we have access to a full list of loans which may benefit you and your specific situation. With over 15 years of home loan experience, West Coast Mortgage Group has mastered the art of helping clients through the loan process and delivering a 5 star experience. We are here to answer any questions you may have and our loan officers are here to assist you with your home purchase, mortgage refinance, or mortgage planning. Call us at any time for a free live consultation or schedule a meeting and we would be happy to help.