Here at Coldwell Banker Innovations we receive a variety of questions regarding everything imaginable pertaining to selling and buying homes. Whether it’s a questions from someone attempting to sell their home on their own or first-time homebuyers seeking advice on saving for that crucial down payment—and everything in between! One of the most frequent questions to show up in our mailbox, however, involves the mysterious practice of reverse mortgages. In this week’s entry, we will explain the basics of a reverse mortgage in order to help you make a decision as to whether you think they are worth investigating further.
So What Exactly Is A Reverse Mortgage?
In broad terms, a reverse mortgage is just what it sounds like: rather than paying principal and interest to your mortgage lender each month, instead, they pay you in the form of a monthly disbursement, or, in some instances, one lump sum. We can hear the sound of your chin hitting your chest right now, followed by something like “Wow! That sounds like a great deal! Where do I sign up?”
Not so fast—there’s more things to consider before the money starts rolling in.
Who Is Eligible For A Reverse Mortgage?
Since the inception of this unique program in 1989, reverse mortgages were intended to help seniors over the age of 62 gain access to the equity in their home. If you’re reading this and you’ve just celebrated your 30th birthday, we’re sorry if we burst your bubble.
In addition to your age, lenders will also consider the value of your home, an accurate interest rate and, in some areas, if there is a lending limit in place. It’s important to know that you must own your home or have a very low balance that can be paid off at closing with the proceeds from the reverse mortgage funding.
Any eligible homeowner who is interested in a reverse mortgage must also understand they must continue to live in their house, making it their primary residence.
How Does This Reverse Mortgage Work?
If you have met all of the criteria, and decide to move forward with a reverse mortgage, you will receive payments from the lender, as mentioned before, usually on a monthly basis. The money you received will need to be repaid upon your death, the sale of your home or if you decide to move out of the property.
Upon your passing, your heirs must give up ownership of the home to the lender or purchase the title from the reverse mortgage company.
What Can I Use The Money From The Reverse Mortgage For?
Really, for pretty much anything! Senior Citizens can help supplement their income, pay for medical expenses or to pay off other debt. Keep in mind, property taxes, and, in most cases, home insurance, will still need to be paid. If you let any of those payments lapse you could be in default!
So, is a reverse mortgage the perfect solution for you? Only you can answer that question! We, however, can help if you decide to sell your home or purchase a new one! Give us a call at 301.745.1500 and keep those questions coming!