Figuring out what to do with mortgage expenses may seem difficult when approaching retirement. Because of longer life expectancies and higher standards of living, more retirees are finding it difficult to pay off their mortgages. However, a reverse mortgage may be one solution to help offset costs for seniors and retirees.
What Is a Reverse Mortgage?
A reverse mortgage works well for adults over 62 years of age who are no longer making an income but still need money to pay off expenses. This type of mortgage allows homeowners to use their home equity as a source of income rather than selling their home or any belongings. If there is sufficient equity, a reverse mortgage will pay off an existing mortgage. Depending on your needs, you will then receive any remaining proceeds from the lender in one of three ways:
- A lump sum
- A monthly payment
- A line of credit
How Do Reverse Mortgages Work?
Reverse mortgages do not have to be repaid until the borrower sells the residence, moves out, or passes away. However, homeowners still need to make sure that their home is insured and maintained. While reverse mortgages do not require monthly payments, borrowers can choose to make them to reduce interest accumulated over time.
When you decide it’s time to sell your home, or you no longer use it as your main residence, you (or your estate) must pay back the lender for the cash you obtained from your reverse mortgage as well as interest and other finance charges.
Benefits of Reverse Mortgages
There are several key benefits to getting a reverse mortgage:
- You are able to use home equity without monthly payments
- There is no check on your credit score
- You remain the owner of your home
- You can spend your money however you wish
What’s Needed to Qualify for a Reverse Mortgage?
When applying for a reverse mortgage, there are multiple requirements that you need to meet.
To qualify, you must:
- Be 62 years old or older
- Maintain the property as your primary residence
- Hold a low remaining mortgage balance or own your home outright
- Have a home in good condition that meets Federal Housing Administration standards
- Have a financial assessment completed by your lender
- Attend a counseling session (either in person or by phone) with a Counselor licensed by the Department of Housing and Urban Development
Find the Loan That Works for You
When choosing a loan to help offset costs, it is important to choose one that works best for you. Doing your research and relying on expert advice can help you make an educated decision. Since 1994, Butler Mortgage has worked to help you find the right loan solution. Give us a call at 407-931-3800 or fill out our free consultation form online.