Lifestyles over 50 Finance & Money
What is a reverse mortgage?
A reverse mortgage is a government insured loan which allows homeowners to access the equity they have built up in their homes. The homeowner retains title to their home. Unlike a regular mortgage, a reverse mortgage requires no monthly mortgage payments (homeowners must still pay taxes and homeowner’s insurance.)
Last year the reverse mortgage industry saw a 9% growth over the previous fiscal year. But is a reverse mortgage something that you should consider?
To qualify, you must be age 62 or older. Any current liens on the property must be paid off by the reverse mortgage, so the homeowner must qualify for more money than they currently owe on their home. The amount someone qualifies for is based on the youngest borrower’s age, current interest rates, and the value of the home.
What happens in the end?
A reverse mortgage is a non-recourse loan, which means that you or your estate can never owe back more than what the home sells for on the open market. This is because a government insured reverse mortgage was built into FHA mortgage insurance. When the last remaining homeowner decides to sell or permanently move out, if they owe more on their home than the value of their home, the FHA insurance makes up the difference. If the home is worth more than what is owed, then the homeowner or the estate keeps the difference.
What are the drawbacks?
A reverse mortgage may not be in line with the desire to maximize your estate for your heirs. Much like a forward home mortgage, after you pass away, your heirs can pay back the reverse mortgage and keep the home or they can sell the home and keep any remaining equity. However, a reverse mortgage frees up and allows you to use the equity that you have built up in your home. The reverse mortgage will likely lessen the available equity in the home for your heirs.
A reverse mortgage is generally a great long term solution, not a great short term solution. Other options such as a home equity line of credit may be more cost effective in the short term.
Where do I find more information?
Speak with AFC Reverse Mortgage. AFC is local, family-owned, and part of the Krajsa family legacy of lending to area homeowner’s since 1947. They can provide you with a quote and more information about the program in just a few minutes over the phone. The staff at AFC can meet with you, your family, friends, and trusted advisers in your home or at their office located on Hamilton Blvd to further discuss the program. Website: PAreversemortgage.com. Phone: 610-437-7230.