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3 Things To Know About Reverse Mortgages

27 June 2018

Eva Kennedy

After retirement, you may find that you want to make use of your home's equity. There are a few ways this can be done, including with home equity loans and home equity loans. Another option that is often more attractive to retirees is a reverse mortgage. With a reverse mortgage, the lender makes payments to the homeowner that are based on the amount of equity in the home. The loan is then repaid when the homeowner moves out permanently, sells the home to someone else, or dies. Reverse mortgages can be a great way to supplement income during retirement. If you are considering a reverse mortgage, here are three things to know.

Are You Eligible?

If you are considering a reverse mortgage, the first thing that you need to do is determine if you are eligible. There are age limits to this type of loan. In order to qualify for a reverse mortgage, you must be at least 62 years old. You must also either own the home outright or have little left on your mortgage. You can also only get a reverse mortgage if the home you live in is your primary residence. 

Borrowing Limits

You should also be aware that there are limits to how much you can borrow with reverse mortgages. The maximum amount that you can borrow with a traditional reverse mortgage is $679,650. However, if your home is worth more and you have sufficient equity, you may be able to borrow more with a jumbo reverse mortgage. The borrowing limit with a jumbo reverse mortgage is $3 million for homes that are valued up to $6 million. It's also important to make sure that you are able to pay for your home's maintenance and home insurance costs when getting a reverse mortgage.

Interest Rates And Closing Costs

When getting a reverse mortgage, it's also important that you consider the interest rate on the loan and the closing costs. Typically the interest rates and closing costs for reverse mortgages are higher than those for traditional mortgages. These higher costs may come as a surprise when you take a look at the total loan balance. Before agreeing to a reverse mortgage, it's important to take a close look at the interest rate, closing costs, and any loan origination fees that may occur when you take out the loan.

Reverse mortgages from places like Senior Mortgage Solutions can be a great way to pay for unexpected expenses or supplement your income during retirement. If you are considering a reverse mortgage, it's important to see if you meet the requirements for this type of loan. There are also limits to how much you will be able to borrow. Interest rates and closing costs for this type of mortgage are also things that you should consider if you are looking into a reverse mortgage. 

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