There are a variety of mortgage products out there that serve the needs of different homeowners, but it can be hard to know what will work best for you. If you happen to be close to retirement and are looking at options that may be more financially beneficial for you, here are the details on a reverse mortgage and how this product can work for you.
The Details On A Reverse Mortgage
The reverse mortgage was created in 2009 as the Home Equity Conversion Mortgage for Purchase (HECM) following the 2008 recession. While this type of mortgage is only available to homeowners who are 62 or older, it offers a way for people to tap into the equity of their home so that they are not required to pay monthly mortgage payments. There are limitations imposed on this product, but this can be useful, as long as all risks and terms of the mortgage are understood.
What’s Required To Apply?
In order to utilize this mortgage product, the homeowner must have paid off their property entirely or have a significant amount of equity in their current home. As people who want to use a reverse mortgage will have to go through a credit check, they will have to be able to prove that they have the ability to pay for all the fees associated with home ownership. This can include common expenses like insurance, property tax and any other applicable charges that come with a monthly mortgage payment.
How You Can Use It
A reverse mortgage can be confusing to understand. It is intended for those who want to receive monthly payments, get a lump sum payment from their equity or even access a line of credit, or just as a means of tapping into additional funds. This means that the overall loan balance of the mortgage will increase over time due to interest. Also, insurance may not be paid consistently. The reverse mortgage assumes that these expenses will be taken care of once the owner has passed away and the property can be sold or the loan balance is paid by heirs.
A reverse mortgage can be a beneficial product for homeowners nearing retirement, but it’s important to be aware of the associated costs and risks involved to determine if this product is beneficial for you. For more information, give me a call – J.P. Cook – 602-320-4253.
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