Reverse Mortgage: What It Is and How It Works?
A reverse mortgage can be a great option for older homeowners looking to stay in their home, get rid of monthly mortgage payments, obtain an extra source of income, or a combination of the above. Here is a guide explaining how reverse mortgages work and their benefits.
What Is a Reverse Mortgage?
Reverse mortgages are loans available to homeowners who either own their home or have a low mortgage balance. The home’s equity is turned into an amount that homeowners can borrow against. For those in good standing who want to pay for cost-of-living expenses, reverse mortgages are a great option.
Reverse Mortgage Eligibility
There are certain requirements you must meet if you’re trying to secure a reverse mortgage, including:
- High Home Equity: In most cases, your home equity must be at least 50%.
- Certain Types of Properties: Only certain types of properties qualify, including single-family homes, homes built after June 1976, and some multi-unit properties.
- Not Planning on Moving: If you’re thinking about a reverse mortgage, it’s best to stay put. Moves can complicate the loan and add undue stress.
- Age: You must be at least 62 years old to take out a reverse mortgage. However, if your spouse is older than 62, you can still qualify for the loan even if they pass away. Also, the older you are, the more you are able to take out in the form of the reverse mortgage loan.
Benefits of a Reverse Mortgage
Homeowners can enjoy many benefits from a reverse mortgage, whether it comes in a lump sum or a monthly deposit. Here are some of the top reasons to secure this loan.
- No Mortgage Payments: If you’re still paying a mortgage, those monthly payments will stop.
- Tax-Free: Since it’s a loan, there are no taxes on this payment.
- Federally Insured: Reverse mortgages are federally insured which means you’ll receive benefits even if your lender defaults.
- Flexible and Restriction-Free: There are several ways to receive your reverse mortgage payment, and you can use the funds however you like.
Secure Your Finances with Butler Mortgage
If you’re looking into a reverse mortgage, contact the mortgage professionals at Butler Mortgage. For over 25 years, we’ve worked with both first-time and seasoned buyers wanting to own a home in Central Florida. To begin finding your right loan solution, call 407-931-3800 or fill out our free online consultation form today.