What’s a Reverse Mortgages
Have you heard of a Reverse Mortgage? The name pretty much gives it away, but how do they work, you might be asking. The idea of a Reverse Mortgage is that you’re taking out monthly installments of your equity. This product makes the most sense for older homeowners. In some cases, the homeowner might not be getting enough from retirement, 401K, social security or other forms of income. It’s also possible that they don’t have these forms of income altogether. In this case, they may be looking for another resource for their daily expenses.
You can choose to take a lump sum of money or receive installments for a set period of time, or in some cases, a combination of the two. As long as you live in the home, no monthly mortgage payments are required. However, the loan needs to be repaid once the house is sold or if the borrower passes away. This is important for any heirs the borrower may have. It’s a good idea to let them know if you’re taking a reverse mortgage loan.
For some, this may be the key component for maintaining their way of life while still living in their home. Some may even have planned this as part of their retirement plan. It isn’t for everyone, but for some, it’s a great option to take out the equity in one’s home and enjoy it while they can. For others, they may find that they would rather leave the equity to their heirs. One downside to the loan is that there are fees associated with the loan, as with any loan: closing costs, interest, and in some cases, the fees with this loan option are higher than traditional loans. Because this loan has interest, it is usually not considered income that would affect social security, medicaid, or medicare. But it’s best to speak to one of our loan officers for details or to your financial advisor.