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Tap Into Your Home’s Value with a Reverse Mortgage

If you are a senior citizen who is interested in tapping in to your homeís equity, you might want to give some serious consideration to obtaining a reverse mortgage. With a reverse mortgage, you can get the supplemental income you need to enjoy life. Or, if you are interested in making home improvements, if you have healthcare expenses, or if there are any other costs you need to address, reverse mortgages can help address your needs. Before obtaining a reverse mortgage, however, it is a good idea to learn more about this type of loan so you can be sure it is the right choice for you.

 

How Does a Reverse Mortgage Work?

With a reverse mortgage, you receive monthly payments or access to a line of credit based on the value of your home. Unlike a traditional loan, however, you do not have to make payments toward repaying your loan. Rather, the lender collects on the debt through your estate after you pass away.

What Kind of Reverse Mortgages are Available?

There are three primary forms of reverse mortgages available. The first type of reverse mortgage, the single-purpose reverse mortgage, is sponsored by nonprofit organizations and some state and local government agencies. While this is the least costly option, this type of reverse mortgage loan is not always available. In addition, as the name suggests, you must use a single-purpose reverse mortgage loan on a specific type of purchase. For example, the organization may require you to use the loan to pay property taxes or to make improvements on your home.

Two other reverse mortgage options are the federally-insured reverse mortgage and the proprietary reverse mortgage. While the proprietary reverse mortgage is a private loan, the federally-insured reverse mortgage is backed by the U.S. Department of Housing and Urban Development. Also referred to as the Home Equity Conversion Mortgage, or HECM, this type of reverse mortgage offers more freedom in terms of how the loan can be used.

What are the Advantages to Reverse Mortgages?

Reverse mortgages offer a number of benefits to the borrower. Not only does a reverse mortgage make it possible to get a tax-free loan without needing to sell your home, you also donít have to worry about income restrictions. Furthermore, you donít have to worry about coming up with the money each month to repay your loan and you can stay in your home as long as you wish.

How Will I Receive Payment Through My Reverse Mortgage?

There are several different ways you may receive the funding through your reverse mortgage. With the ìtermî option, you will receive a fixed amount of money each month for a certain period of time. With the ìtenureî option, you will receive a pre-determined amount of money for as long as you are in your home. Another option is the ìline of creditî method, which allows you to draw funds from a pre-determined amount whenever you feel the need. Some lenders will also offer a combination of monthly payments and a line of credit.

About The Author – Kevin Koitz is a member of the Koitz Group, a boutique Bethesda Real Estate firm, and specializes in Maryland homes for sale.


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