If your parents are over 62 and you’re concerned about how to help them you may want to consider a reverse mortgage for a whole lot of very good reasons.
If you’re the one over 62 you may want to consider eldercare financing with the equity in your home for a comfortable retirement.
Take a look at the many types of projects you can accomplish with a reverse mortgage:
– Home renovations
– Pay off your current mortgage
– Boost your retirement income
– Pay medical bills
– Help your adult child with a down payment on their first home
– And more…
In simple terms, a reverse mortgage allows you to take part of the equity in your home and convert it into cash. This is without having to sell your home or pay additional monthly costs.
With a traditional mortgage, you make monthly payments to the bank or lender. With a reverse mortgage, you receive the money but in most cases don’t have to pay it back for as long as you stay on the property.
The loan is repaid in one of 3 different ways:
– When you sell the home
– When you move or the property becomes your secondary residence
– When you pass away
Proceeds of a reverse mortgage are often tax-free. As well, there are usually no income restrictions when applying for a reverse mortgage.
There are three types of reverse mortgages:
– Single-purpose reverse mortgages
– Federally-insured reverse mortgages. Also known as Home Equity Conversion Mortgages (HECMs) and backed by HUD.
– Proprietary reverse mortgages. These are private loans that are backed by the companies or group of lending institutions/individuals that develop them.
Single-purpose reverse mortgages are the cheapest but the most restrictive in terms of what you can use the money for AND they’re not available everywhere.
Single-purpose reverse mortgages can only be used for one purpose which will be determined by the government or nonprofit lender giving you the loan.
For example, the lender may state the money can only be used to pay for home improvements or repairs. The majority of homeowners, with low to median income, usually qualify for these loans quite easily.
HECMs and proprietary reverse mortgages are usually more expensive than regular home loans. The upfront costs can be high. However, HECMs are widely available, can be used for ANY reason and have no income or medical requirements.
Meeting with a counselor before applying for an HECM is mandatory. Often lenders for proprietary loans will require you see a counselor before hand too.
Exactly how muchyou can borrow from either an HECM or proprietary reverse mortgage lender depends on several factors. These include the homeowner’s age, the type of reverse mortgage you want, the current market value of your home, and interest rates.
In general though, the older you are and the more equity you have in your home, the more money you can get.