How Does A Reverse Mortgage Work?

A reverse mortgage works by letting homeowners who are at least 62 years old borrow from their home’s equity without the being required to make mortgage payments every month. As the borrower, you may opt to take the funds in a lump sum, structured monthly payments, or line of credit. The loan repayment will be required once the last surviving borrower leaves the home permanently.

How Reverse Mortgage Works

• -      You can access a part of the equity of your home
• -      The percentage will be based on the age of the youngest borrower
• -      You will not make mortgage repayments every month
• -      The funds you get are tax free and can be used for anything
• -      The loan will be repaid after your death or if you decide to sell your home.
• -      The remaining equity will belong to your heirs

How Is Reverse Mortgage Different?

You might be wondering how a reverse mortgage is different from a traditional loan, or what they refer to as a forward loan, in that it works the other way around. The traditional loan is a rising equity loan, falling debt while the reverse mortgage loan is a rising debt loan, falling equity.

So when you make payments on a conventional loan, the amount that you owe will be reduced and the equity that you have in your home increases as time goes by.

With a reverse mortgage loan, you will not be required to make regular payments, so when you draw out the funds and as interest piles up on the loan, the balance will grow and your equity position in the house will become smaller.

You never have to make a payment on a reverse mortgage loan and there will be no prepayment penalty of any sort. This means you can make payments any time, including and up to payment in full, without having to deal with penalty.

How Much Will You Receive?

The amount you get in a reverse mortgage Columbia will be determined differently compared to a standard mortgage. You will not hear people mentioning things like loan to value ratio just like you would on a conventional loan.

On a conventional loan, the lender will agree to lend a specific amount that is identified as a percentage of the home’s value. This could change according to different factors, like the credit of the borrower, the needed loan amount, as well as the type of property.

The factors that dictate the amount you get includes the age of the youngest borrower, the home value, HUD lending limit, and interest rates.

Other factors that affect the loan amount include the costs to get the loan, existing liens and mortgages, and any remaining cash will belong to you or your heirs.

Reverse Mortgage Payment Options

There are different ways you can choose from to take the money available on your reverse mortgage.

You can get the reverse mortgage payment through a lump sum, a line of credit, a payment for a specific amount and period, also called term payment, and a guaranteed payment for life or tenure payment.

Call Reverse Mortgage Specialist if you would like to know if this type of loan is your best option.

David Stacey
Reverse Mortgage Specialist
Columbia, SC 29205
(803) 592-6010
http://reversemortgagecolumbiasc.com/

Is Reverse Mortgage A Cost Effective Way To Fund Retirement?

Seniors in the United States are unable to deal with $7.19 trillion worth of housing wealth. Although not historically part of a comprehensive and balanced retirement plan, tapping the equity of your home could a cost effective method of funding your retirement plan.

Accessing the equity of your home takes on a dual role of providing you with income and hedging against a possible correction the housing market.

When looking for extra income for retirement, there are a few retirees may want to downsize, relocate to an area with a much lower cost of living, or utilize assets from a retirement account. However, there are also a lot of people who don’t want to sell their houses or other investments.

A good solution is a reverse mortgage loan, which provides homeowners at least 62 years old flexible methods to use the equity of their home to help them meet their goals for retirement.

Understanding Reverse Mortgages

Before, reverse mortgage loans were the last resort. But now, things are different. Financial advisers and homeowners can now look at a reverse mortgage as a part of a holistic retirement plan.

Although individual situations and needs differ, one of the important drivers behind a reverse mortgage is to get rid of an existing mortgage or offer an annuity-type of payment. Both options help boost the household cash flow. The extra income can be used to cover expenses and other long term needs like in home care. It could also help maintain the retirement income at a level wherein their assets are totally depleted.

Additionally, a reverse mortgage in Columbia could offer an alternative source of revenue once stock investments are not performing well, so people do not need to sell stocks at relatively low values.

Please note that reverse mortgages are not suitable for everybody. There are different factors that need to be considered. One important consideration is the duration a potential borrower intends to remain in their house. Although many retirees want to age in place, one out of three baby boomers say they want to move at some point during their retirement years. Others say they would like to move in an assisted living or rent instead of owning a house. For such situations, traditional financing like HELOCs may be the best option to address shorter term funding requirements.

Reverse mortgages’ interest rates are comparable to that of traditional mortgages. 

However, there might be significant closing costs because of the upfront Federal Housing Administration FHA mortgage insurance premium. Those costs are 2% of the value of the home. Therefore, if a home is worth $500,000, then its insurance premium will be worth $10,000. The insurance is exactly what makes a few reverse features possible. Most importantly, there are no needed principal or interest payments while residing in the house, or that the borrower or the heirs would never owe much more than the property’s value. In case these advantages aren’t of value to the senior borrower, traditional mortgages that doesn’t include this insurance premium makes much more sense.

For all the baby boomers who would like to age in place, the benefits of a reverse mortgage could be of great value. The insurance cost amortized more than 20 to 30 years could be a reasonable value proposition when taking into account not just those advantages, but others like the chance to have a line of credit that grows and adds up over time, regardless of what happens to the property value.

Call Reverse Mortgage Specialist if you are thinking of taking out a reverse mortgage.

David Stacey
Reverse Mortgage Specialist
Columbia, SC 29205
(803) 592-6010
http://reversemortgagecolumbiasc.com/

What Should You Do If You Have Been Disqualified For A Reverse Mortgage?

Nothing can guarantee that you will be financially stable and secure once you reach your senior years. You always have the option to save, or buy insurance. You can even invest or reallocate yearly. But despite all these strategies, you may still realize that medical bills, home repairs, and rising costs can create problems in what you believe as a foolproof financial plan. If this takes place, you may consider taking out a reverse mortgage.

But what if you don’t qualify for this type of loan? For a few borrowers, the answer is to reapply later. But for others, it may be that a reverse mortgage loan isn’t the right financial solution for their current circumstances. Fortunately, there are three alternatives that you may want to consider.

What is a reverse mortgage?

A reversemortgage Columbia is a kind of equity loan that is designed for borrowers who are at least 62 years old to provide them with a reliable source of income once they retire. Instead of making payments to a lender for the loan they’ve taken out, a reverse mortgage won’t require any until the time comes that the borrower no longer lives in the house.

Reversemortgage borrowers could access the money in a form of monthly payments from the reverse mortgage lender to their bank account. They could also get the money as a form of a lump sum or a line of credit. But this would depend on what the purpose the funds will serve. If the borrower dies or decides to sell the house, the reverse mortgage will be repaid through the value of the house.

Reverse mortgage provides a lot of benefits. In case you choose the monthly payment option, this specific income stream could help you maintain a comfortable lifestyle and make sure that you don’t have to sell your house. Senior homeowners have different needs and wants and if applicants would like to age in place, then this type of loan is a good alternative.

Factors That Could Disqualify You From A Reverse Mortgage

Just like with any type of loan, there are specific minimum requirements needed if you want to get approved for a reverse mortgage loan. If you don’t meet these guidelines then you will be disqualified.

Age

You need to be at least 62 years old if you want to be eligible for a reverse mortgage loan. You also have to note that the younger spouse’s age who is not applying for a loan could be the cause of your disqualification. Lenders want to make sure that the non-borrowing spouse is capable of sustaining themselves in the house over their lifetime, too.

Credit and Spending History

Although your credit score is not the only factor that would determine if you will qualify for a reverse mortgage loan, lenders will still take your current expenses and credit history into account.

If you want to be approved, lenders would like to see that you can fulfill your financial obligations. In some cases, that is with your current retirement savings. However, some people may not qualify for a reverse mortgage in case the loan itself will not offer sufficient cash to meet their expenses. Factors like property maintenance, food, and the costs of prescription drugs are going to be considered.

Your Property

There are instances when it is not the borrower that is disqualified. Sometimes, it is the property.

The property should be a single family home or a residential building with at least two units and is being occupied by a borrower. In some instances, condominium projects as well as manufactured houses might also qualify. Such properties also have to be in good condition. Although there’s no set amount of home equity needed to qualify, you still have to make sure that you’ve got at least 50% home equity. In case your current mortgage is very high, you may not be able to qualify for a reverse mortgage loan.

How To Requalify For A Reverse Mortgage

In many instances, a reverse mortgage disqualification isn’t permanent. You could still qualify in the future once your situation changes. Here are a few things you need to know.

What If I Was Disqualified Because of Bankruptcy?

In you case you are going through bankruptcy and you applied for a reverse mortgage, there is a possibility for you to be disqualified in case the procedures have not been finalized. When this happens, you can reapply once the bankruptcy has been discharged.

What If I Was Disqualified Because of Credit History?

In many instances, underwriters would take into account special situations and think about working around them. They could also reconsider you once you have improved your credit history. If you have improved your credit profile or perhaps explain your special situation, the reverse mortgage underwriters could reconsider approving your loan.

What If I Was Disqualified Because of Too Little Home Equity

You may be disqualified when the amount that you were approved to borrow in a reverse mortgage loan is not enough to pay off your current mortgage and sustain you. When this occurs, you could wait until you have made more principal payments on your existing mortgage and increased your home equity. If you want to speed this up, you should think about making larger payments.

Call Reverse Mortgage Specialist if you want to know how you can increase your chances in getting qualified for a reverse mortgage. 

David Stacey
Reverse Mortgage Specialist
Columbia, SC 29205
(803) 592-6010
http://reversemortgagecolumbiasc.com/

Reverse Mortgage Pros and Cons

A reverse mortgage can be an important aspect of your retirement planning, giving you cash now and for the future. However, this type of loan is not for everybody. You need to understand the pros and cons of a reverse mortgage loan to help you decide if it is right for you.

The Pros of Reverse Mortgage

A reverse mortgage loan is a type of loan that can help homebuyers who are at least 62 years old to have a comfortable retirement.

They continue to live in their homes and continue to own the property. Just like any type of mortgage, the borrower must meet their loan obligation, make sure that the property taxes, insurance, homeowners association fees and the maintenance updated.

The borrower could choose how to receive the funds. It could be a line of credit, a lump sum, that you could tap as required. It could also receive it as a steady stream of payments per month for a certain duration or as long as you live in your house. It could also be a combination of all these options. Those who have chosen a fixed rate loan would get one disbursement lump sum payment. There are other payment options aside from all these but they are only available for an adjustable rate mortgage.

You can also use the funds that you get from the reverse mortgage Columbia to pay off your existing home mortgage. Although there remains a lien on your house for the remaining amount of the reverse mortgage loan, you won’t be required to pay the monthly principal and interest payments on the loan, and that means you will be freed from hassle of having to pay a monthly mortgage. Just like with any kind of reverse mortgage, you need to meet the obligations specified for your loan and that includes paying taxes, fees, etc.

Closing costs as well as ongoing fees including Federal Housing Administration, Mortgage Insurance Premium, could be financed using a reverse mortgage loan, which means out of pocket costs aren’t that high.

Loan proceeds are not taxable income. It will also not affect your Medicare and Social Security Benefits. But you should consult Reverse Mortgage Specialist to know the potential implications on your finances when you take out a reverse mortgage loan.

A reverse mortgage is considered as a non-recourse loan. Additionally, if the value of your house increases, then you should think about refinancing your reverse mortgage loan so you can access additional loan proceeds. Once you have repaid the loan, the remaining equity will be given to you or your heirs.

Cons of A Reverse Mortgage

The loan balance will increase as time goes by as the loan interest and other fees build up. As home equity is utilized, your heir would inherit fewer assets. You could still leave your house to your heirs however, they need to pay back the loan balance. In most cases, selling the house can pay off the loan. But you can also use a traditional mortgage or other funds.

Additionally, the fees associated with a reverse mortgage are higher compared to a traditional mortgage. The loan will become due and should be repaid if a maturity event happens like the last surviving borrower passes away, the house will no longer be the principal residence of the borrower, or the borrower vacates the house for over 12 months due to medical reasons or six months due to non medical reason. The loan would also become due once the homeowner is unable to meet the loan obligations. These include paying the insurance, property taxes, homeowners association fees, property maintenance, and more.

Call Reverse Mortgage Specialist if you wish to find out if this type of loan is suitable for you.

David Stacey
Reverse Mortgage Specialist
Columbia, SC 29205
(803) 592-6010
http://reversemortgagecolumbiasc.com/