Should you consider a reverse mortgage?
Here are the top 4 reasons our clients decided to go with a Reverse Mortgage:
- They still owe money on their traditional mortgage. Paying a mortgage on a fixed income can be challenging. A Reverse Mortgage gives you the flexibility to leverage the equity in your home without requiring monthly payments.
- They want to improve their cash flow while preserving their retirement savings. A Reverse Mortgage gives you access to cash without depleting your savings or 401K.
- They want to avoid financial shortages down the road. Reverse Mortgages can help you plan for future expenses, such as long term care, without the fear of running out of money.
- They want to purchase a new home during retirement. With a Reverse Mortgage, you can purchase a new home while keeping your cash flow intact and adding money to your retirement.
A thorough consultation with our team can help you determine if a Reverse Mortgage will be beneficial to you and your retirement goals. In the meantime, here is a list of lending requirements for your review:
- Age. At least one of the eligible borrowers must be age 62 or older. If you’re age 62 and your spouse is younger this program may still work for you but requires some investigating into the advantages and disadvantages of having a spouse under age 62.
- House Value. FHA reverse mortgage loan programs currently recognize values up to $970,800. However, this does not mean you are not eligible if your property value is higher than $970,800. You can still qualify, using the equity portion of your house value up to $970,800. Home values and Reverse Mortgage loan amounts are determined by an appraisal. Note: Depending on your home’s value and your goals, there are other loan programs for high value homes that might be a better fit for you. These products, which have no minimum value requirements, can be beneficial when the home value is above $1,000,000. In addition, some proprietary loans will recognize values up to $10,000,000.
- Interest Rates, Mortgage Balance, and Home Equity. Qualifications are also based on current interest rates and the outstanding loan balance(s) of your existing mortgage(s). Generally speaking, you need to have about 50% or more equity in your home to use a Reverse Mortgage to pay off your existing mortgage loan.
- Primary Residence. Keep in mind that a Reverse Mortgage loan can only be financed on your primary residence; it will not work for investment properties or a second home.
- Property Taxes, Homeowners Insurance, and HOA Fees. Borrowers for a Reverse Mortgage are responsible for on-going property expenses, including annual property taxes, homeowners insurance, and homeowners association (HOA) dues (if applicable). If you have been late on your property taxes or insurance payments in the past 24 months you may still qualify for a reverse mortgage loan, but it may require an impound account for property expenses which is referred to as a Life Expectancy Set Aside (LESA).
- Type of Home. Most home types qualify for Reverse Mortgages. A borrower can finance a single-family home, FHA-approved condos, town houses, twin houses, duplexes, triplexes and even 4-plexes.
- Credit Score. Your credit profile is a consideration when financing a Reverse Mortgage loan, but credit score is not the most important factor. In fact, we can finance much lower credit scores than traditional mortgage lenders.