Did you know that 88% percent of adults between 50 and 80 want to age in place? And it’s no wonder. Oftentimes, our houses are more than just a place for us to sleep and eat. They’re a sanctuary, full of good memories and treasured mementos. If you’re part of the 88 percent, then this article is for you. Here are a few ways that a reverse mortgage can help you stay home!
First, it’s important to define a reverse mortgage. According to Investopedia, a reverse mortgage is “a type of home loan for seniors ages 62 and older.” It allows older adults to convert a portion of their home equity into cash.
Q: “Does this mean I’ll have to sell my home?”
In short: No! Taking out a reverse mortgage does not mean you’ll have to contact a real estate agent at your nearest convenience. It also does not mean you’ll have to make additional monthly payments, or that you’ll even have to repay the loan afterward! This type of loan is good for older adults, because it’s meant for borrowers who already own their home.
Q: “Who is eligible for a reverse mortgage?”
Beyond the age requirements of 62 or older, you must either own your property or have at least 50% of the property’s value in equity (according to Forbes). Additionally, the home must be insured and well-maintained, and the borrower must pay their property taxes. Of course, it doesn’t stop there! The property must also meet the appropriate FHA property standards, in addition to partaking in at least one reverse mortgage counseling session.
Q: “Is it difficult to get approved for a reverse mortgage?”
New FHA guidelines have made it a little more difficult to get approved for a reverse mortgage. As with traditional mortgage loans, lenders will assess one’s finances, which may include: income, assets, credit, and expenses. According to SmartAsset, the housing collapse and subsequent recession caused many reverse mortgage holders to default on their loans. This string of foreclosures, in turn, impacted the FHA. In order to protect themselves, the FHA has enforced these guidelines to sift through applicants who may pose a larger financial risk.
As mentioned in the previous section, a reverse mortgage allows homeowners to convert a portion of their equity into cash and eliminates monthly mortgage payments. The homeowner can use the proceeds from a reverse mortgage however they want. This may include the following:
Of course, a borrower doesn’t have to accept cash! Lenders offer the option to receive funds in several different ways, including as a lump sum, line of credit, or regular monthly payments (according to Brett Strum). This gives borrowers the sort of flexibility that will allow them to enjoy retirement to the fullest.
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Originally published April 06, 2023
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