When considering a reverse mortgage, it’s helpful to know all the ways it could benefit you. A reverse mortgage simply allows you to convert part of the equity in your home into cash without having to sell your home, but there are a few things to keep in mind when deciding whether or not a reverse mortgage is the right choice for you.
In order to take out a reverse mortgage, you must be at least 62 years old, and you should be prepared for ongoing costs like interest and long-term property costs.
There are three different types of reverse mortgages. The least expensive option is the single-purpose reverse mortgage. This mortgage type can only be used for one purpose, and the lender will be the one to specify where the money is spent. Usually, the funds go towards home repairs, property taxes, or medical bills. The single-purpose reverse mortgage isn’t available everywhere, so it’s important to see what’s offered by your state and local government organizations.
The next type of reverse mortgage is a loan made by private companies called a proprietary reverse mortgage. Proprietary reverse mortgages allow you to spend the funds in any manner you see fit. The funds can be used for living expenses, medical bills, or even remodeling your home. If you own a higher-valued home, you may get a bigger loan advance based on the value of your property. But proprietary reverse mortgages may not offer multiple disbursement options, the funds are most likely available only as a lump sum at closing.
Lastly, Home Equity Conversion Mortgages (HECMs) are a type of reverse mortgage that are insured by the Federal Housing Administration (FHA). The amount that can be borrowed is based on the value of the home at that given point in time. This option allows for lower interest rates, and it makes up the majority of the reverse mortgage market.
If you meet these requirements and feel like a reverse mortgage is right for you, reach out to one of our knowledgeable mortgage brokers so we can help you start the process.