For many homeowners, the idea of loans and mortgaging can seem intimidating. Everything from paperwork to speaking with licensed specialists can become so overwhelming that it feels like you are walking through the trenches. For older homeowners, this could be an additional worry to an already growing-list of retirement concerns. We want to help reduce the overwhelm by providing senior homeowners with a mortgage plan that works for them. Enter the reverse mortgage.
What is a Reverse Mortgage?
A reverse mortgage is a loan that allows qualified clients to convert the equity from their home into money that can be used however they want. Unlike a traditional mortgage in which the borrower is required to make payments to the lender, a reverse mortgage has the lender providing money to the homeowner, and there are no monthly payments required of the borrower. However, it is important to remember that, much like a traditional mortgage, the homeowner still pays property taxes and homeowners insurance and must maintain the home to avoid foreclosure.
Benefits of a Reverse Mortgage
Along with flexible payment options and optional monthly payments, many other benefits come with obtaining this type of loan. One of the biggest benefits is the fact that you can increase your monthly income. This can help you pay for such necessities as in-home care, medical supplies, and your day-to-day expenses. Another benefit is that a reverse mortgage loan can help lower or even eliminate your monthly mortgage payments. Finally, it can help you enhance your retirement plan by increasing your savings, protecting your equity against declining home values, and creating an emergency fund.
What is the Process?
If you’re interested in getting a reverse mortgage, the first step is obtaining the right information and making sure it is the right loan for you. Have a chat with one of our licensed specialists and discuss your financial goals, ask any questions you may have and see if you qualify. After that, there will be three simple steps:
- Applying for the loan – You will fill out the application with your licensed specialist and attend a required, third-party counseling session to learn more about your options.
- Processing – You will have your home appraised, and your loan will go through the underwriting process.
- Closing – Your process will be complete, and you will now enjoy the benefits of your new loan!
How Will You Receive the Money?
How you receive your money depends on what type of loan you picked. There are four different distribution options. A lump sum delivers proceeds in one lump sum payment. This option is available with both the fixed or adjustable rate. Monthly payments, available only with the adjustable loan rate, provide a fixed amount of money each month. The line of credit places your money in a line of credit that you can have access to whenever you need it and will grow in value over time when there are funds available. This option is available only with the adjustable rate. And finally, you can do choose a combination of these options, which allows you to receive your payment in any combination of the other options and is available only with the adjustable rate loan.