is meant to be spent relaxing with loved ones, golfing with lifelong friends, and spoiling your grandchildren. However, with fixed incomes, inflation, and heavy medical expenses, your hard-earned, life-long savings may seem to disappear before your eyes. In times of crisis, a is one way many Americans are fighting back. Here at Best Company, we are determined to help you understand the benefits and drawbacks of a make sure you are pointed in the right direction, and find peace of mind moving forward. You should know what a entails, if you qualify, and what options you have.
A is a government-established program to help people approaching age have a place to live and to support . When you the mortgage on your home, you are, in essence, buying part of your home back from the bank that loaned you the . Once you have made all your , you own 100 percent in the home, meaning if you sold it you would keep 100 percent of the profit minus paying the agent. The can trade some of that home for a while still continuing to live in the home. The will not have to until they move from their home or pass away. For more information, read our simple guide to reverse mortgages.
loans open up another source of . This program makes it possible to trade the home you already own for . At many companies you can get the in a lump sum or through . After you take out the , you may continue to live in your house and you will not be required to to the company until you die or move. Once you die or move from your home, you or your heirs will often sell the property in order to back the .
There are several types of reverse mortgages you can consider.
Home Equity Conversion Mortgage (HECM): This is the most basic package. This program is also often considered the safest option. Government regulations ensure that customers are protected within the . is also required in an .
Proprietary Reverse Mortgages: Proprietary reverse mortgages are created specifically by reverse mortgage lenders to give different clients better rewards or incentives to join their company. Rather than using the traditional HECM program, these companies offer different incentives, pay plans, or rates to ensure you are getting the best deal for your situation. These deals can be great but do not offer the same protections as the HECM model. To explore proprietary reverse mortgages in-depth, check out the company links.
The maximum amount someone can receive on a HECM is $679,650. Although this is also the most someone can receive in a mortgage loan. Many factors contribute to each individual’s case:
Value of home: The value of the home property is one of the biggest determining factors for the amount of money you can receive.
Age: The older you are, the more you can receive for your reverse mortgage. A 62-year-old will get less money than someone who is 90 years old.
Interest rates: Interest rates are ever-changing; ask your lender for the current interest rate. Rates are usually adjustable rates, but some reverse mortgage lenders offer fixed rates.
Choice of distribution: Though you have the option on how to receive the loan, some options can be better than others. A line of credit tends to give you the highest possible proceeds, but payments come overtime. A lump sum gives you the money faster, but fees may apply.
Almost all of the fees for HECM can be financed and paid from the proceeds of your loan. You will not have to pay for them upfront, but the amount available to you will be reduced.
Traditional fees: Those who get a reverse mortgage must be willing to pay property taxes, homeowners insurance, and home maintenance costs.
Origination fee: These vary, but they are all capped by the Federal Housing Administration so no one can go higher than these rates. Many mortgage lenders will give you rebates or deals, so these fees may be even less.
To calculate the maximum origination fee:
Note: Maximum Origination Fee is $6,000
Reverse mortgage counseling fees: This fee is totally dependent on the counselor. You should always be informed of the price before setting up a meeting, but the price usually is around $125 dollars.
Third-party charges: Closing costs from third parties can include an appraisal, a title search and insurance, inspections, surveys, recording fees, mortgage taxes, credit checks, and other fees. These tend to cost between $1000 and $2000.
Servicing fees: These are fees that ensure you are keeping up with your insurance payments and other documents. It costs, at most, $35 a month, and may be added to the monthly interest rates.
You have many options to choose from when looking for the best fit. As you research, make sure to fully explore the different options that each company offers, the deals they are willing to make, and how willing they are to help you find comfort, security, and freedom.
People get a reverse mortgage for many reasons. Traditionally, people over the age of 62 have used this as another retirement income along with social security. However, many people are tapping into their hard-earned assets in order to enjoy retirement more or to use this typically tax-free option to invest in something else.
Overall, getting a reverse mortgage is a personal decision that requires thought, research, and consideration of the pros and cons. Look at all the aspects of your particular situation in order to determine if a reverse mortgage is the right decision for you.
If you qualify for this program, it is always wise to look into it. Whether you are financially struggling or just looking to see how much money you could make, it is always smart to explore your options.
There are many factors that play into whether or not a reverse mortgage will be right for you. Micahel Drake, owner of PMG Loans asserts that,“Reverse mortgages can be a good idea in situations where someone owns a property with significant equity and is looking for a steady stream of income.” A reverse mortgage can be a quality opportunity to be able to enjoy your years of retirement by turning an asset you have into cash.
To some, turning your home equity into cash may be seen as limiting to your heirs because they will not inherit as much from the family home. While this is important to consider, it is also valuable to look at it in a different light. If you are struggling to make ends meet, taking out a reverse mortgage can grant you more financial independence and lighten your children’s financial burden of helping with your financial constraints.
For a reverse mortgage to make sense for you, you must be in a position where you can continue to pay all the fees that come along with owning a home besides your monthly mortgage, which will be covered by the reverse mortgage company, even if you use part of the reverse mortgage loan to pay off these fees. If you are not going to be in a position to do this, even after you receive the loan, a reverse mortgage may not be a good fit for you.
More and more people are understanding and utilizing a . Not only is it a program to help those who are financially unstable, but it may interest those who want to retire early, buy a new home, or plan to stay in their current residence until they pass away.
For many people, their homes are a primary asset. This is one way to get fast in order to for more immediate needs, such as college for grandchildren or sudden health problems. Just be aware of the and other expenses. Many companies have a high and it is important to note that even though you will not have to worry about monthly you will have to for other home related such as and .
The is not due back until the last living person on the moves or dies. At that point, many people sell the home to off the , and even if they can’t sell the home for as much as the was for, the FHA has policies in place to protect you and your family.
Many people wonder why reverse mortgages have a negative connotation to them. The reason is simple, this option is often someone's last option for financial freedom. In many cases, they have run out of and use this as a necessary source of income. Though this is true, many are now using reverse mortgages to free up assets, buy a nicer home, or have a more enjoyable retirement. Below list out a few cons of reverse mortgages: