Guide to Reverse Mortgages: 5 Things You Should Know
If you’re reading this, you may be looking to find out more information about reverse mortgages. The term in itself may not be something you’re familiar with. No worries; we’re here to help you understand everything you want to know about reverse mortgages.
While this is by no means a comprehensive list of things to know, it can help you have a basic understanding of whether a reverse mortgage is right for you. Let’s get started:
1. What is it exactly?
If you’re planning to retire in the PNW, your first question may be, “what is reverse mortgage Oregon?” Basically, this kind of term refers to the kind of loan offered to anyone over the age of 62 to use a part of their house’s equity for tax-free income. While mortgages have homeowners paying lenders, in this type of scenario, the lender will be paying the person who owns the home. For the most part, the person who qualifies for a reverse mortgage will have already paid off the mortgage of their home.
2. How does it work?
Essentially, there is something known as the principal limit which varies, mainly based on the age of the youngest person borrowing or whether or not a spouse is eligible who is not borrowing. The older they are and if the home is worth a lot are factors that impact a lower interest rate. If you have an HECM with a variable rate, you may get a credit line that you can easily access until it’s gone, or get monthly payments over a certain amount of time, etc. A HECM with a fixed interest rate, will provide you with one lump-sum payment.
3. What should you use it for?
There are a number of things that one can use a reverse mortgage for, but many people use it to beef up their retirement income, fix up their home, or pay for medical bills. For seniors who may be having a difficult time with the economy at this time and need extra help to cover expenses, this could be a unique way for them to take care of themselves.
4. What if your spouse is under the age of 62?
Because a reverse mortgage is designed for seniors over the age of 62, you may be wondering what happens if your spouse is younger than you. Does that cancel out your possibility of receiving a reverse mortgage or what are your options? The answer is a bit complicated but if you meet the right criteria, including that you live in your home (primary residence), are current with taxes on your property, obligations with HOA, etc., and keep your home in good condition, etc., more than likely you’ll be approved.
5. How much money can you expect?
Now that you have a better understanding of what a reverse mortgage is, you could be curious about how much money you could get from one. There are variables that will provide you with that answer and while we can’t provide you with an exact number without knowing your unique situation, different factors like the market value of your home (currently, not when you bought it), interest rates, your age, and costs associated with the loan, are all things to consider as you decide if you want to go for a reverse mortgage.
A Few More Things To Consider
Is it for you? At the end of the day, the costs to close a reverse mortgage aren’t low and there are also factors to consider, such as the servicing fees, origination fees, MIPs, and third-party fees. There are various pros and cons to a reverse mortgage, so before you jump into making a decision, consider if it’s the right decision for you and your spouse at this time. It could be a great way to boost your income or you could end up having trouble in the future if the borrower passes. Take time to consider the details before making your final decision.