Reverse Mortgages in
the Bay Area, California
Are you over the age of 60 (Jumbo’s)_62 (HECM’s), living in the Bay Area, and looking for a way to increase your retirement income? If you own a home, a reverse mortgage can be a way to bring a little more income to cover your living expenses. But before diving right in, you may want to learn a few things about what a reverse mortgage is and what it does.
What Is a Reverse Mortgage?
A reverse mortgage, or a Home Equity Conversion Mortgage (HECM), is a loan that helps you turn the equity on your home into cash. With a reverse mortgage, instead of you making a monthly payment to your lender, your lender makes a monthly payment to you, a lump sum payment, a credit line, or they provide some combination of these options. For most reverse mortgages, you are still responsible for insurance, property taxes, and other fees, such as HOA fees, and you must continue inhabiting the home. Typically, you do not owe any payments back on the loan until your home is vacated.
Reverse Mortgage Pros and Cons
Some people read about HECMs online (AARP’s article on reverse mortgages, for example) and start looking at reverse mortgage companies and rates. As with any loan or financial decision, there are both advantages and drawbacks to a reverse mortgage. Here are a few of the reverse mortgage pros and cons:
- Immediate, Tax-Free Cash: With a reverse mortgage, you cash in your equity right away, and you don’t owe any tax on it upfront.
- Unchanged Government Benefits: Not only do you not owe taxes on a reverse mortgage, but the income does not affect your Social Security or Medicare benefits (though it could affect Medicaid eligibility).
- Declining Property Value Protection: The federal government agency HUD insures HECM reverse mortgages through the FHA. This means that if your home value were ever to decrease, you won’t be responsible for more than the sale value.
- Higher Fees: The fees on a reverse mortgage tend to be higher than a regular mortgage. This isn’t always the case, though. Check with your lender to see what fees they assess.
- Less Equity: Converting your equity into cash means that the equity on your home is likely to decrease.
- Staying in Your Home: The terms of a reverse mortgage almost always stipulate that you may not temporarily vacate your home for longer than 364 days. You must stay in your home to receive the income from a reverse mortgage. You can sell the home, though. Many people use a HECM for purchase to downsize without sinking all the assets from the sale into the new home.
- Upper Lending Limit: Because the FHA insures HECMs they are subject to the FHA’s upper lending limit of $679,650. If you have a high-value home, worth over about $1.2 million, a jumbo reverse mortgage may be a better option. Jumbos are not FHA-insured, but they are non recourse loans, and they work somewhat better for borrowers in their 70s than for younger borrowers.
Read a more comprehensive list of reverse mortgage pros and cons for more information.
Can You Afford It?
When it comes to getting a reverse mortgage, you’ll want to make sure it works for your individual financial circumstances. For many people, using a reverse mortgage calculator helps them determine if a reverse mortgage is good for them. You might want to give it a try. Others work with reverse mortgage lenders or a loan officer at their lending institution to see if they can afford a reverse mortgage. Whatever you do, make sure you’re making a beneficial financial choice.
Does all of this sound like something that could benefit you? If so, apply today to get started on your reverse mortgage.