Reverse Mortgage in
Using a reverse mortgage is a key element when planning for retirement. It’s something you may never have considered, especially if you own your home free and clear. Why encumber it with a mortgage? But there are circumstances where you might want or need to tap into the equity in your home without selling. Trinity Reverse Mortgage is a mortgage broker and can help you find the right reverse mortgage services in Irvine, California so you can get the most out of your home’s equity and provide a more comfortable future for you and your family.
How a Reverse Mortgage Can Benefit You in Retirement
So, what is a reverse mortgage and how can it help you? A reverse mortgage is a loan available to homeowners 62 years or older. It gives you the opportunity to use part of the equity in your home and turn it into cash. A reverse mortgage uses the most valuable asset you have–your home–to help you plan for your future and increase your income stream, perfect for retirees.
Types of Reverse Mortgages
Formally known as a home equity conversion mortgage (HECM) a reverse mortgage converts equity in your home to cash. No monthly mortgage payment* is required for as long as you live in the home and continue to meet your obligations such as property taxes, homeowners’ insurance, and property maintenance.
This means you can use a reverse mortgage to pay off a traditional mortgage, as long as your equity is greater than the mortgage balance, and eliminate monthly mortgage payments.*
*(Although you would still be responsible for the items mentioned above, property taxes, hazard insurance, and other fees, like homeowners’ association fees.)
You can also use a type of HECM, the reverse mortgage for purchase when you sell your home and finance the purchase of a new home without tying up all the money from the sale of your home in the new home, which preserves your funds for other uses.
The FHA backs HECMs. Their upper lending limit is $679,650. For high-value homes a loan not backed by FHA is available. A jumbo reverse mortgage works particularly well for older lenders, typically in their 70s, with homes valued above $1.2 million. Some borrowers tap into a jumbo reverse mortgage during economic downturns rather than selling investments at a loss. If you have a Condo Association that does not have FHA approval and you cannot do a HECM, you may qualify for a Jumbo on the Condo. Jumbos for Condo’s start at a home value of $500,000 and higher.
Reverse Mortgage Pros and Cons
All mortgages have associated costs and benefits, so a look at the benefits and costs of a reverse mortgage can help you decide if one is right for you.
What are the benefits of a reverse mortgage?
When you retire, your income is limited—unless you’ve made remarkable strides with investments or have other sources of residual income. Even if you think your retirement is set in stone, life happens and can drain your assets or drastically change your plans.
With a reverse mortgage you can choose to take your funds as a lump sum, as a steady stream of monthly installments for a set period of time or as long as you live in your home, or you can open a line of credit to use as needed. And you can use two or all three of these options in combination.
You can also choose whether you want to lock in a fixed interest rate or go with a variable rate. While a fixed rate has the advantage of stability it requires you to take a lump sum up front and effectively limits your loan to 60% of your available funds, the FHA’s limit on disbursement during the first year of a loan. Unless your loan balance is higher than 60% of the available funds, then you can take an additional 10% of available funds.
If you want to access your funds using other options choose an adjustable rate. You might be able to get a slightly lower interest rate with an annually adjustable rate or monthly adjustable rate mortgage.
What are the costs or drawbacks of a reverse mortgage?
In considering reverse mortgage lenders and their rates, keep in mind that the value of the estate inheritance may decrease over time as you convert your equity into cash and interest accrues.
It’s also important to remember that the loan is due upon the last borrower’s death, or when it ceases to be the primary residence of at least one borrower, such as if you enter a nursing home or other facility, or move in with children. If you’re planning on leaving the home as part of an inheritance, you should discuss these things with your heirs.
This is just a general overview of what a reverse mortgage is and how it can benefit your retirement. For more information, visit our FAQs section. If you need a reverse mortgage calculator, see our summary of costs and fees of a reverse mortgage.
If you need more assistance figuring out what the costs will be for a reverse mortgage and how much money you will be able to access, feel free to call Trinity Reverse Mortgage at 1-877-752-1048 and talk with a representative.
Trinity Reverse Mortgage is committed to giving you the highest quality service and information, and to making sure you fully understand the risks and benefits of a reverse mortgage.
Get started on the path to a more comfortable retirement now! Apply today and see how we can help you prepare for your future.