What You Need To Know About Reverse Mortgages
Tuesday May 24th, 2022
What exactly is a reverse mortgage?
Also known as an “equity release”, a reverse mortgage is a loan that allows you to get money from your home equity without having to sell your home. You can borrow up to 55% of the current value of your home.
Who qualifies for a reverse mortgage?
You must be 55+ years old, and the homeowner. The home must be your primary residence.
What will lenders take into consideration when reviewing your application?
1. Your age AND the age’s of any other people registered on the title of the home.
2. The location of the home.
3. The home’s appraised value, the condition of the home and the type of home it is.
How does it work?
💰You have to pay off the mortgage AND any lines of credit or outstanding loans that are secured against your home, typically mortgages & home equity lines of credit.
💰You can use the reverse mortgage to:
-pay for home repairs or improvements
-help with regular bills
-cover healthcare expenses
There are several ways to receive the money. Payment options can be one large lump sum, a smaller sum and monthly payments or just monthly payments. You can work with your lender to figure out the best option.
How do you pay back the loan?
You don’t have to pay a reverse mortgage back in regular installments. You have the option to pay back the principal and interest at any time, although there may be penalties if you pay it off early.
When do you have to pay the reverse mortgage back?
You have to repay the amount left owing when:
➡️you sell or move out of your home
➡️the last borrower dies
➡️you default on the loan
Your estate has to pay back the entire amount owing when you die.
Things to consider:
🤔a reverse mortgage is usually associated with a higher interest rate than a regular mortgage
🤔you will need a home appraisal & there is a cost associated with that
🤔the cost of a set up fee
🤔there may be a penalty if you pay the loan off early
🤔there will be legal fees associated with closing costs
There are pros & cons associated with a reverse mortgage. It’s important to talk to specialists in the field so that you make a decision that best suits your needs.
This information should not be relied on as legal advice, financial advice, or a definitive statement of the law in any jurisdiction. For such advice, please consult your own legal counsel, financial representative, and/or insurance representative.