If you are interested in tapping into your home equity, but you’re not sure how to go about it, a reverse mortgage may be the answer.
You should consider a reverse mortgage if:
You want to eliminate your monthly mortgage payment.1 Are you still making monthly payments on your home? Replacing your conventional mortgage with a reverse mortgage will eliminate your monthly mortgage payment. You may be able to increase your cash flow and can use your money for other things during retirement.
You need access to cash but want to stay in your home. If you are looking to age in place and looking for an extra source of cash, a reverse mortgage may be the solution. The proceeds from a reverse mortgage can be used any way you want, and there’s no payment is due until you move out of the home or fail to meet the loan obligations.1
You want to consolidate debt. The proceeds from a reverse mortgage can be used to pay down high-interest debt such as credit cards or a car loan.2 This is another way that a reverse mortgage may increase your cash flow.
You want to supplement your retirement income. If your retirement income is falling short of covering your expenses, a reverse mortgage may allow you to live more comfortably within your monthly budget. Reverse mortgage proceeds can be disbursed in any combinations below:
- Line of credit– draw as needed up to the maximum eligible amount
- Lump sum – a lump sum of cash at closing (only available on fixed-rate loans)
- Tenure – monthly payments for the life of the loan
- Term – monthly payments for a specific number of years
You want to have an emergency fund. If you have concerns about how you would handle a large unexpected expense, you may be able to set up a line of credit with a reverse mortgage. The line of credit grows over time3 and is available whenever you need it.
You may also find there are a few circumstances where a reverse mortgage may not be right for you. For example:
You want to leave the home to your heirs. It is important to discuss with your heirs your decision to get a reverse mortgage and what their obligations will be to pay the loan when you pass away.
Your health is in decline. If your health is declining and you are thinking about moving to an assisted living facility, a reverse mortgage may not be a good idea. A reverse mortgage becomes due and payable after a maturity event has occurred. A maturity event is triggered when you reside in a healthcare facility for longer than 12 consecutive months.
You want to move. For borrowers to get the most value out of their reverse mortgage loan, they should plan on staying in their home for many years. If you are thinking about or planning to move, you need to repay the loan as soon as you move, which may cost more than just waiting to sell.
If you are interested in learning if a reverse mortgage may be a good thing for you, call 800.976.6211 to speak with a licensed reverse mortgage specialist.
1 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
2 Your HECM loan will accrue interest that together with principal will have to be repaid when the loan becomes due.
3 The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.