It’s hard to go anywhere these days without hearing something about reverse mortgages. You’ll see ads about them on TV at all hours of the day and you’ll also see a lot of information online about these loans. Sometimes it seems that there can be information overload. At Cliffco Mortgage Bankers we often answer questions from our clients about reverse mortgages and we want you to understand how they work so you can decide if a reverse mortgage is right for you.
Cliffco Mortgage Bankers Can Help You Use Your Home’s Equity
At Cliffco, we’re committed to helping you find loans that are right for your needs. Very often we help clients find mortgage loans to be able to buy property and to achieve the dream of home ownership. Sometimes we help people find loan programs that give them the extra boost they need to be able to afford the property that they’re looking for. But we also help clients who already own property to use the equity in their home to live fuller lives. So here are five facts you need to know about reverse mortgages.
Fact: They’re Designed for Seniors Who Meet Certain Requirements
According to the Department of Housing and Urban Development (HUD), reverse mortgages, known officially as the Home Equity Conversion Mortgages (HECM), gives older Americans more financial security. To be eligible, the Federal Housing Administration (FHA) requires that you be 62 or older, own your home outright or be able to pay off the remainder of your mortgage with the proceeds from the reverse mortgage.
Fact: You Will Keep Your Home with a Reverse Mortgage
There is a myth out there that taking out a reverse mortgage means that a bank will end up owning your home. That’s not true, according to CBS News. As would be the case with a traditional loan, the bank will have a lien on the home, but you will continue to live there until the last surviving owner dies or vacates the property. When that happens, if the equity remaining in the loan is more than the balance of the loan, the extra proceeds go to the estate. If the sale of the home is not enough to pay off the reverse mortgage, the lender takes the loss and must ask the FHA for reimbursement.
Fact: Reverse Mortgages Are Used to Supplement Income
According to CBS News, borrowers often use reverse mortgages to create funds in case of unexpected, emergency expenses. They also often use the mortgages to pay off existing mortgages or other loans or debts. While it is theoretically possible to use the money for non-critical expenses like vacations, it’s not advisable.
Fact: You Should Pay Attention to Interest and Fees When Taking out a Reverse Mortgage
One of the requirements for taking out a reverse mortgage is that you must have the financial ability to pay the closing fees and ongoing charges like taxes, home association fees and insurance. Another thing to take into account is the interest that will accrue over the life of the reverse mortgage. You won’t be paying off that interest the way you do with a traditional mortgage, according to CBS, but when the loan comes due, the accrued interest could eat into your equity and the loan might not be worth it.
Fact: Cliffco Can Help You Get a Reverse Mortgage
If you feel like a reverse mortgage may be right for you, Cliffco will lay out your options, answer your questions and explain what you need to know. We’re experts on all types of home loans. To learn more, contact us today.