For many struggling homeowners, a reverse mortgage can be a good way for them to make money off of a real estate property they already own. However, there are a lot of strings attached, and some may need to be pulled if you want to benefit from the arrangement. There are still a lot of unanswered questions for a number of retirees who own real estate, who are struggling to make ends meet after retiring from their jobs and careers.
Is retirement a sustainable option for homeowners if they establish a reverse mortgage?
Whether or not it’s possible, and how comfortable the lifestyle will be, will depend on the location, the person, and the home. In case you or a loved one is looking to start a reverse mortgage after retirement, here are some tips, necessary information, and info on how to proceed.
Who can get a reverse mortgage?
The arrangement is only available for those over 62 who don’t plan on moving, and who can afford the cost of maintaining the home.
Why get a reverse mortgage?
These people are usually looking to supplement their income, or put away funds for a rainy day. Some people also arrange for a reverse mortgage when they need to cover hospital bills, fund a child or grandchild’s education, or handle an emergency… it all depends on your lifestyle.
How does it work? The bank makes payments towards the homeowner throughout their life, until the owner sells the home, dies, or moves out for good. These payments depend on accumulated home equity loans, and can vary depending on the real estate property value.
Are there restrictions on how the money is spent? No. The money is yours to use as you please, so there are no statutes on what you buy or use it for. Whether it’s going towards family expenses, paying off debt, or personal gain, is up to the homeowner.
Is the amount affected by anything? Several factors can influence how much money you get from the bank, including the interest rate, the home value, you or your younger spouse’s age, and the lower appraisal value/HECM FHA mortgage limit of $625,500.
Anything else to know? A few things.
- Generally, the older you are and the more your home is worth, the more you can get from a reverse mortgage. Also, homes that are still having mortgages paid off can still benefit from a reverse mortgage, but only if the mortgage can be paid off by the loan.
- The real estate property must be your primary residence, and you can collect the payments in a multitude of ways. It’s a good idea to speak to a real estate professional if you are planning to apply for a reverse mortgage, and it’s always a good idea to ask for second opinions from family and friends. A real estate professional can tell you if it makes more sense to sell outright and move into a smaller place.
Reverse mortgages are a great way to cover costs that might otherwise be impossible to afford, and while the fees are high, many families and couples have benefited from the arrangement. Whatever you’re using the money for, be sure to capitalize on your home value and explore the possibilities.