Trinity Reverse Mortgage in
Huntington Beach, California
If you’re a senior over the age of 62, or you’re simply gearing up to plan for your retirement, it may be worth it to consider a reverse mortgage. Reverse mortgages offer a valuable retirement planning tool which can greatly increase your income stream by utilizing your largest asset: your home!
Types of Reverse Mortgages
The formal name, home equity conversion mortgage (HECM) states what a reverse mortgage does: converts the equity in your home to cash or a credit line.
A variant of the HECM is a reverse mortgage for purchase, which people often use to downsize to a smaller home without sinking all the proceeds from the sale of the larger home into the smaller, preserving them for other uses.
HECMs are federally insured by the FHA to make sure borrowers don’t end up owing more than the house is worth. Because of this, they are subject to the FHA upper lending limit of $679,650.
For people whose home values are more than about $1.2 million, who want to borrow more than the FHA upper limit, these loans are called jumbo reverse mortgages, which are not regulated or insured by FHA, so they are not subject to the FHA’s upper lending limit but have the same protections. Jumbos can be used for properties that FHA will not insure like Unapproved Condo associations. For condos, the home value needs to be $500,000 or greater.
There are many reasons you should look into using a reverse mortgage lender, but that doesn’t mean it’s for everyone. The pros and cons of a reverse mortgage can be difficult to understand, and that’s why we’re here.
Check out the ups and downs of using a reverse mortgage and if it can benefit you. If you still have questions, you can visit our FAQs section for more information.
Benefits of a Reverse Mortgage
First and foremost, using a reverse mortgage gives you the opportunity to use part of the equity in your home and turn it into cash. You can choose to take a lump sum of cash or look into a regular monthly payment option, a line of credit, or some combination of these three.
Either way, a reverse mortgage increases your income without requiring monthly mortgage payments. As long as you keep up with things like property taxes, homeowners insurance, property maintenance, and other things in your contract, you won’t have to make monthly payments, though you can if you want.
Generally, you’re on a fixed income after retirement. Unless you have other means of residual income, a reverse mortgage can help you live the retired life you’ve always dreamed of. You may be eligible for more money as you get older, or if your home increases in worth. Plus, you can always refinance and get a lower interest rate. You can refinance an existing reverse mortgage to another HECM or to a Jumbo.
Remember, when you work with a reverse mortgage lender, you still retain the title, too. The lender does not take the title to your home and you’ll never owe more than the appraised value of the home at loan maturity. You will owe only what you have borrowed plus interest, just like a regular conventional mortgage.
Negative Aspects of Reverse Mortgages
But there are some other items to consider as well. Reverse mortgage rates may be a little higher than traditional mortgage rates and the fees associated with them add up.
All mortgages have costs, but the reverse mortgage fees can include the loan origination fee, mortgage insurance fee, and closing cost such as: appraisal fee, title insurance fees. Costs vary but can be as high as $7,000 to $22,000. Many of these costs are rolled into your loan, so you don’t have to pay them out of pocket. For some figures to plug into a reverse mortgage calculator see our “Costs & Fees of a Reverse Mortgage.”
Another drawback of reverse mortgages is the possibility of moving into a full-time care facility. With a reverse mortgage, you are required to pay back the loan if you move out of your home for more than one year, unless another eligible borrower that is on titles, such as your spouse, or a child over age 62, occupies the house as their primary residence.
Another downside is the effect on your estate. Reverse mortgages always decrease the equity in your home, which would leave less money to your heirs.
Trust the Professionals
Don’t be too alarmed by these cons though. Trinity Reverse Mortgage in Huntington Beach, California is ready to help you fully understand the benefits of a reverse mortgage and how it can help you and your family!
We’re here to help you get started on the path to a more comfortable retirement. Apply today and see how we can help you prepare for your future.