What is a reverse mortgage?
In brief, a reverse mortgage is a type of home loan for homeowners aged 55+ that requires no monthly mortgage payments. Reverse mortgages allow the borrower to access equity they have built up in their homes now and defer payment of the loan until they die, sell, or move out of the home. If you qualify for a reverse mortgage then you can generally access up to 50% of your home’s value depending on what the lender is willing to offer.
Borrowers are still responsible to make sure their property taxes and home insurance is paid and remains in good standing.
Once approved, you can ask for the money to be given to you in a lump sum or you can opt to receive a certain amount monthly. The main advantage is that you can continue to remain in your home for as long as you wish, without being forced to leave your home and without making any monthly payments.
How to Qualify
- You and your spouse are both of 55+
- Your home is your principal residence
- Any outstanding loans against your home must be less than the funds available from the lender
Advantages of Reverse Mortgages
There are various advantages, but one of the main advantages of having a reverse mortgage is that you will be protected from any interest rises or a deficit in your property value, so you will never have to pay for any shortfall. Of course, this only applies once you have taken out the reverse mortgage.
Another advantage is that if you chose to have the money given to you monthly rather than by an initial lump sum payment it allows you to have additional tax-free income. It will not affect any income-related benefits that you may be entitled to receive or are already receiving such as your pension incomes. However, if you chose to pay off this lump sum early, the early repayment charges are much higher than a traditional mortgage.
Remember there are no monthly repayments, unlike a traditional mortgage. As also previously mentioned you do not pay the money back, until in the event of death or if you choose to move or sell your home.
If a reverse mortgage is something that is of interest to you feel free to contact us for more information
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