A reverse mortgage is occasionally known as a home equity conversion mortgage and is available to seniors 62 years of age and older.
A reverse mortgage is a fantastic opportunity for seniors.You may wonder, “how does reverse mortgage work?” In a traditional loan, the homeowner makes payments. When you enter a reverse mortgage agreement with a bank or lender, you, the homeowner, receive payments. As with any loan, it is vital to do extensive research and shop so that you select the perfect lender for your individual needs.
Like any other mortgage, to qualify for a reverse mortgage, you have to meet specific eligibility requirements.
- You must meet the age requirements, of course.
- The home that you plan to implement a reverse mortgage against has to be your primary residence.
- You also must have sufficient equity in your home.
The amount that you can receive from a reverse mortgage varies based on three factors: the borrower’s age, the type of loan program that the borrower chooses, and how much equity is left in the home after current mortgages have been paid off.
Once you determine that you’ve met all the qualification requirements and are satisfied with the terms, you can get to the business of reaping the benefits that a reverse mortgage offers.
Benefits of a Reverse Mortgage
There are seven significant benefits to seniors receiving a reverse mortgage.
1. You Remain A Homeowner
The best part about a reverse mortgage for seniors is that they get to remain homeowners. As a senior, you deserve to live the rest of your days feeling comfortable and secure. With a reverse mortgage, you can get the money you need, for whatever you need, and never risk losing your home as long as it remains your primary residence.
2. Many Options For Disbursement
The three most common ways you can receive payments are through a lump sum of money, allocated monthly payments, or through a line of credit created with the lender of your choosing. Some lenders may offer the option to combine the disbursement types to suit your needs best.
3. No Restrictions on Use of Funds
Another great benefit of a reverse mortgage for seniors is that there aren’t any restrictions on how you spend the money you receive. It is common for seniors who consider a reverse mortgage to assume that you have to use the funds for specific purchases, but that just isn’t the case. Since it’s equity in your home, you can spend the funds how you see fit. The money you receive can be used to take care of healthcare bills, hospice care, adult day care, renovations, vacations, or any other payment you need to cover.
Since the advent of the reverse mortgage, seniors are now able to live with a bit more financial freedom. No longer will being low on funds because of a fixed income be a major concern. A reverse mortgage gives you a bit of breathing room, which is often much needed.
4. No Monthly Payments
Monthly payments like those you make with a traditional loan are a thing of the past. Instead, you receive the payments. The homeowner isn’t even responsible for repaying the loan until the last borrower has left the residence, whether that be because the primary residence has changed, or because of a tragedy such as death. If the homeowner passes away, the house is sold to pay back the loan. Without a monthly mortgage payment, seniors can use the money they would spend on home a mortgage payment to pay for other more pressing needs that arise in the golden years.
5. Backed By The Government
A reverse mortgage is backed by the government, making it a protected financial move that seniors can afford to make. The Department of Housing and Urban Development protects reverse mortgage agreements. Having a mortgage loan that’s backed by the government means that your money is insured, which protects seniors in the long run. The government assures and underwrites all of the payments so that seniors don’t have anything to worry about when it comes to receiving their money.
6. No Negative Effect On Other Government Programs
Reverse mortgage payments come to you as tax-free income. A reverse mortgage loan also does not interfere with other government programs such as Social Security and Medicare. Without an adverse effect on any other government programs, a reverse mortgage gives you the financial freedom to use your money without fear.
7. Thorough Explanation Through Counseling
Seniors receiving a reverse mortgage undergo counseling to cover all aspects of the process thoroughly. The reverse mortgage counselor seeks to make sure that the homeowner understands what the loan entails and the exact terms of the loan. You can rest easy knowing that the lender wants you to be well-informed. Education is monumental, and the counseling sessions will help you determine how you can secure the best rate possible with low interest for repayment.
The counseling benefit allows you access to a professional counselor who can answer any questions they may have about the reverse mortgage, such as “how does a reverse mortgage work?” After the counseling is complete, you receive a certificate. This certificate must accompany their application for the reverse mortgage.
Seniors have an incredible advantage in being able to receive a reverse mortgage. While remaining homeowners, you also get the advantage of receiving payments, in many different disbursement types, instead of making monthly mortgage payments. Greater financial freedom allows you to afford living more comfortably. You also receive a loan that is backed by the federal government, ensuring financial security.
To many seniors, financial security is essential because they are living off of a fixed income. Reverse mortgage payments allow you the funds to cover other bills, purchases, or needs without any restrictions. With thorough research and careful consideration, you can find a reverse mortgage lender that satisfies your requirements. Contact Twin City Lending today to discuss how we can work together to find a reverse mortgage right for you.