Reverse Mortgages can be useful for senior homeowners who need money.
The first thing to know about reverse mortgages is you must be at least 62 years old to qualify for one.
The second thing you must know is a reverse mortgage is a loan.
Like any loan, you must pass a credit check.
These facts are just the tip of the iceberg.
A recent article in The Daily World, titled “Reverse mortgages—your questions answered,” dives deeper.
How does a reverse mortgage work?
A reverse mortgage allows a senior to convert a portion of his or her home equity into income or cash without having to pay the monthly mortgage payments.
Can you secure a reverse mortgage if you already have a mortgage on the house?
Some people even use their reverse mortgage to make mortgage payments.
Do you lose possession of the home in a reverse mortgage?
Homeowners keep the title in their name.
When do you repay the loan?
When you no longer live in the home.
Can you sell the home?
But when you sell, the loan payments are due.
How much money can you receive from a reverse mortgage?
The dollar amount depends on several factors, to include.
- The age of the younger spouse;
- The value of the home; and
- The current interest rate.
When do you get the money?
The money can be transferred to you in several ways, such as:
- Through a line of credit;
- In monthly payments;
- All at one time in a lump sum; or
- In any combination of the above.
What happens if something happens to your lender?
The Federal Housing Authority and the Department of Housing and Urban Development (FHA/HUD) insures all reverse mortgages.
Are they too good to be true?
Reverse mortgages are real, but they are not magic.
Because you will not make monthly payments, the interest on the loan will accumulate.
The balance you owe will increase as well.
You may have little or no equity left in your home when you sell or move.
Still, there is a law protecting the borrower and his or her heirs from owing more than 95 percent of the market value of the home.
Before you take out a reverse mortgage, work with an experienced estate planning attorney to determine whether it is in your best interest.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: The Daily World (November 18, 2016) “Reverse mortgages — your questions answered”