As you age, the options for getting a loan are reduced. This is because you have no source of income and therefore you may not pay off a loan. However, you have an option in reverse mortgages. This mortgage program is designed for senior borrowers. The program allows you to use the equity in your home to receive payments, rather than making monthly mortgage payments. This is the “reverse” part of the mortgage. So, here are some reasons why someone might seek a reverse mortgage.
Allows you to Use Your Home Equity
A reverse mortgage allows you to tap into your existing home equity so that you can supplement your retirement. You can do this by enjoying payments for the rest of your life, or you can make use of a line of credit.
At this age, your kids have moved out and your home is too big for just the two of you. You can use the proceeds from the reverse mortgage to purchase a smaller home.
Various Features and Safeguards
The loan comes with attractive features. For one, the loan is insured by the federal government, which means that you are assured of flexible terms. You also get to retain your home and the title. In the case of your demise, the property is transferred to your heirs. The reverse mortgage is also tax-free, making it affordable. The mortgage doesn’t affect your social security or your Medicare plan. You also don’t have to worry about a prepayment penalty.
As long as you are more than 62 years of age and you have some equity in your home, you can qualify for this loan. You don’t need proof of income and there are no minimum credit requirements. This makes it easy for you to be eligible. However, you have to use the home as your primary residence.
Many Eligible Homes
You can use a wide variety of homes to qualify for this mortgage. These include single-family residences, condo, PUD, 1-4 units primary properties, manufactured homes and modular homes. However, you can’t qualify for the loan using a manufactured home.
The Home Purchase Feature
When you use the reverse mortgage for purchase feature, you can get the loan and use the proceeds to purchase a new primary residence.
Flexibile Loan Distribution Options
You can access the loan in various forms that include:
• Lump sum – you get a specific amount at a given time. You can use this to pay off an existing mortgage.
• Term – here, the funds are released to you in fixed amounts for a set period as per your request.
• Tenure – you get the funds in fixed monthly allotments for as long as one of you occupies the property.
You can use a reverse mortgage calculator to understand how much you qualify for before you apply.