Many homeowners are finding added stability and greater financial security through a reverse mortgage. Though, it may not be the right solution for everyone — it's something worth considering.
Let's start by weighing the pros and cons:
Reverse mortgage pros
Remain in your memory-filled home
Eliminate monthly payments by paying off your existing mortgage
Receive additional retirement funds from your home's equity
Enjoy tax-free money
Postpone touching your retirement funds, pension, or Social Security
Out of pocket costs are minimal since fees and insurance can often be financed into the loan
Once loan is due, you sell the home to pay the loan — you never owe more than it's worth
After the loan is repaid, any remaining equity belongs to you or your heirs
Reverse mortgage cons
Not all properties qualify (because you must live in the home as your primary residence, investment properties and vacation homes do not qualify)
Fees are involved (just as they were when you took out a mortgage)
Loan balance grows over time, which may limit your heirs' inheritance
Medicaid and other need-based government assistance can be affected if too many funds are withdrawn (and not spent) in one month
The loan will become due if the homeowner fails to pay their property taxes or homeowners insurance, or fails to maintain the property
How to qualify for a reverse mortgage
There are qualifications that must be met in order to receive reverse mortgage funds.
Must be 62 years or older, though a non-borrowing spouse can be under 62
Live in the home as your primary residence
Own the home and meet financial requirements
If qualifications are met, a borrower can begin further discussing eligibility, mandatory counseling, application, loan processing, underwriting, and closing.
Upon receiving reverse mortgage funds, the borrower must continue paying homeowners insurance and property taxes. They must also keep the home properly maintained, or they the loan may become due.
Our recommended approach
The best way to understand a reverse mortgage is to talk through requirements with a licensed professional. At American Financing, we have dedicated mortgage consultants. So, you can expect simple, straightforward, and honest conversations. Why not see if a reverse mortgage is for you?
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
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