If you are approaching retirement, you may needed a way to meet your obligations financially and plan for the future. I would suggest looking into a reverse mortgage as a way to refinance your home with terms you can afford. If you do not have as much saved as you would like, a reverse mortgage can help you get the quality retirement you want.
What is a reverse mortgage?
A reverse mortgage is an option for anyone over the age of sixty-two years of age. Owning your own home means you can borrow money and receive a lump sum in monthly payments against the predetermined value of your home. It is like a line of credit, except you do not have to pay anything back in return for the loan.
Everything changes with death or moving. The equity you have is used to pays bills, and the home is your collateral. If you were to die or move, your estate or you must pay back the outstanding balance against your estate. You can also sell your home as an option for repayment.
Why get a Reverse Mortgage?
Bad Credit
If you do not have bad credit, but you did have bad credit, a reverse mortgage is a way to go as a borrower to do much-needed repairs on your home. Your home has plenty of equity to back up the mortgage, so you can live and thrive off of the equity when approved.
Money Flexibility
If you are approaching the age of retirement and you have always been a life-long saver, but your savings and retirement are not nearly enough to live on. You need what money you do have and the home you have paid for to work for you. If you work out the right terms for the reverse mortgage, you can do more than keep up your home, and you can travel and see what the world has to offer.
Need a loan with Flexible Interest Rates
You might need a loan to help with general home repairs and upkeep. A reverse mortgage comes with very specific terms for lending that allow you to get the money you need with the terms you can manage from the start. The loan does not become due unless you die or move into a different living situation and look to sell your home.
What is the eligibility for a Reverse Mortgage?
If you are currently sixty-two years old, you can apply for a reverse mortgage if you have met the obligations for your mortgage. If your spouse is younger than you, you must wait for them to reach the age of sixty-two.
Your home needs to be paid off. But if it weren’t, You would need to finish paying off my mortgage on it before you can try to apply for a reverse mortgage. Your current financial standing, such as credit card debt or car payments, must also be in good standing.
What does a Reverse Mortgage Cost?
A reverse mortgage collects the interest from your loan is compounded daily. The balance adds up and gets added to the principal balance at the end of every month. You can track everything through your monthly bank statements, and you will not need to pay any of it back until your loan comes due.
Unlike a traditional loan, you will not need to pay back the loan on a regular schedule or make monthly payments. Your loan will mature on a schedule set by you. Your main life events, such as if your spouse and you sell your home or if you die, will make the terms active. If you fail to full fill the terms of the loan or do not pay your insurance or the taxes on your property, your loan will be in default.
There are three times in which fees that take effect with a reverse mortgage. Make sure you know when you might be getting fees or any other out-of-pocket expenses.
Starting Fee
Starting the paperwork and filing it will cost a small fee for setting up everything. They take the value of your home and determine the amount required to pay for starting the processing. It can be anywhere from a percentage of the value of my home to around two percent if your home value exceeds two hundred thousand dollars, then there can be an additional one percent charge.
Servicing Fees
Often there are servicing fees for any loans established. For monitoring the loan, an additional charge may be applicable. These fees do not usually exceed thirty dollars though that can change if an adjustable-rate or annual rate comes into play.
A fixed-rate is better if you can get it. It ensures you will not have any surprises when it comes to paying on loans.
Mortgage Insurance
To get the reverse mortgage loan, you will need to get reverse mortgage insurance. Reverse mortgage insurance ensures that the lender gets their money back regardless of what happens in real life. It is insurance for both parties to ensure the loan execution is accurate and complete.
The insurance also guarantees you will not be required to pay more than the balance of the current value of your home. It also helps to prevent the insurance premiums do not excel 0.5 the balance of your loan.
Closing Costs
Like closing on a new home, there will be closing fees that come with the finalization of the reverse mortgage paperwork. The costs associated with closing the paperwork include credit checks, inspections, recording fees, mortgage taxes on federal, state, and local levels and any surveys that you may need to fill out because of your home state.
The exact fees you will be charged depending upon the loan you need and the lender you go through. It also depends upon your state and the current rates available. Be sure to speak with representatives at different banking institutions and private lenders and websites that offer competitive rates and the best deals.
Initial Interest rates
The initial interest rate is the one that applies at the start of my reverse mortgage. The interest rate calculates the rate throughout the entirety of the mortgage. Unless you get a variable rate, the interest rate should stay the same for at least the first month or year of your mortgage.
Do your best to get a fixed loan. If you get a variable-rate loan then your lender will have based the initial interest rates off the life of the mortgage, the value of your home, and the ten-year index. The ten-year index rate applies to how they expect the mortgage rates to change and the service fees you assume with the mortgage.
How does refinancing work?
Refinancing your home to a reverse mortgage is much like when you applied for our first mortgage. You were qualified for the loan in the same way as you were for your home loan. You will review the different loans to compare the good and the bad of each type of loan.
I would suggest looking at each loan and run the numbers through different online applications to ensure that you get the best deal. It will also give you an initial idea of what you can expect when you apply for the one you select. Be sure to also speak with a couple of banks in person to compare what you find online with the current rates.
If you are not retired, you can apply for the loan just like you did with your home loan or car loan. You will have provided the lender with wage statements from your job, tax returns, and current bank statements. Like your initial home loan, you will need to prove proof of your ability to repay the loan
From my previous personal experience with buying my home, I know they will look into your credit history, so before you apply for the loan, get your credit score up by paying down all debut as much as possible.
How many different types of Reverse Mortgages are there?
There are three different types of reverse mortgages.
1. Single-Purpose
A single-purpose mortgage is the least expensive of most of the reverse mortgages you can get. You can get one through local loaners or nonprofit agencies if you have specific reasons. I would speak with several people through your local community center to find the right agencies to work with for getting the single-purpose loan.
A single-purpose reverse mortgage is something you will get if you need money for that one specific purpose, such as needing a loan to do repairs on your home. They will give you a loan if you need it for a specific purpose.
You will still need to repay it when you sell my home or move. You also will need to keep up your home and property. The single-purpose reverse mortgage is a good choice as you will have fewer fees and will pay less interest.
2. Home Equity Conversion Mortgage
Federally insured, a home equity conversion loan has the backing of the U.S. Department of Housing and Urban Development. This type of loan is more expensive than a regular home loan. It is a popular way to get a loan fairly quickly, though it does carrying more risks and upfront costs.
The Home Equity Conversion mortgage is a popular option as there is no minimum or maximum for income or any medical requirement. There are also no restrictions on how you can use the loan, so you can use it to fix up your property or buy yourself a new car.
While this type of reverse mortgage is easier to get, alternatives are recommended, and counseling is often a requirement to ensure that you know all the risks associated with this loan and the consequences if you fail to pay it back.
The amount you are eligible for is something the loan officer determines based on your age and credit score. It is also based on the value of your home and the current interest rate. If you are older and have more equity, you could get a larger mortgage, though you still might not want to owe that much money on your home.
Once approved, you have several options for receiving payments that include cash advances at times that you specify. As long as you are living in your home, and it is your primary residence, you can draw on the line of credit at any time. You can also change your payments whenever you need to for a small fee.
3. Proprietary Reverse Mortgage
A proprietary reverse mortgage is only something you can get if your home and property are worth more than six hundred thousand dollars. The mortgage is easier to get because of the larger value placed on the property. You can get a fairly sizable loan with your home as collateral. When you die or move away from it, the loan will become due.
The way the regulations are set up requires the lenders not to exceed the value of the property and the home. The Federal Regulation prevents the mortgage from exceeding the value of the home to ensure the estate will not be required to pay back the loan, should you die. The only way your estate might be responsible for paying for it is if the value of your home drops or you live many years after you receive the loan.
How does a reverse mortgage come due?
A reverse mortgage comes due when if die or sell your home. Suppose you receive a property reverse mortgage because the value of the home and the property allows for a larger amount of money to be lent. The total value of the estate will back your loan, and you will not need to pay any of it back. The only time that changes is if the value of your property drops below the loan amount; then, your estate or you will need to pay back the money loaned.
Final Thought
Going through everything to get a reverse mortgage takes time. There are a lot of variables and details that you needed to study and accounts to compare. Take your time to go through everything thoroughly before you make any final decisions.
