These loans could help fund your retirement
Seniors who are facing diminished retirement income thanks to this year’s sharp stock market declines may be sitting on an untapped source of funds—their home. With a reverse mortgage, you can get paid for the equity in your home without selling it first.
What reverse mortgages do
With a reverse mortgage, you receive a loan based on your home equity, but you keep the title to the home. That means no selling and no moving. You can keep right on living at home.
You don’t need to make monthly mortgage payments, either. Instead, the lender pays you—either in monthly payments, or in the form of a line of credit.
Reverse mortgages are an appealing option for many, especially when Social Security doesn’t go as far as it used to thanks to inflation.
The most popular form of this type of mortgage loan is one backed by the Federal Housing Administration. An FHA-insured home equity conversion loan (HECM) from a Charlotte mortgage company converts your real estate equity into cash, although the exact terms, interest rates, and details can vary.
When is the best time for a reverse mortgage?
The right time for a reverse mortgage is when you need an additional source of income, but you’re not ready to sell your home. It’s great for when you’d like to improve your quality of living and have no plans to move anytime soon.
Why now is a good time for a reverse mortgage loan
Home values in Charlotte and surrounding areas are rising. A reverse mortgage lets you tap into those increased values while you’re still living in the home, opening up possibilities for fun and financial freedom without having to worry about selling first.
Does it protect against inflation?
For retirees who are feeling the pinch of inflation, a reverse mortgage could be just the thing. It can ease the burden of inflation, giving room in their budget for simple joys like dining out or visiting grandchildren.
It can cover more nerve-wracking expenses, too, such as unexpected healthcare costs. And most importantly, a reverse mortgage can help you avoid drawing from your investment accounts while the market is down, so you don’t have to worry about “locking in” your losses. Instead, you can “lock in” the appreciation on your home while you wait for the stock market to recover.
What could you do with a reverse mortgage?
Consider the possibilities of having your mortgage lender pay you instead:
- No more traditional monthly mortgage payment
- Pay off your property tax
- Easily cover your home insurance
- Take a dreamed-of vacation
- Help a loved one pay for their education
- Make home improvements or repairs
- Pay bills
- Cover general cost-of-living expenses
- Pay for healthcare expenses
What you can do with your funds is up to you, although some loans impose restrictions on how you can spend the cash (such as single-purpose reverse mortgages).
What are the qualifications for a reverse mortgage?
Generally, a borrower needs to be at least age 62 before they qualify for a reverse mortgage. Here are the typical requirements for an FHA HECM:
- Primary borrower must be 62 or older
- Must live in the home as your principal residence
- Home must be paid off or close to being paid off
- Cannot have delinquent federal debt, such as student loans
- The home must meet federal property standards
- You must sit for counseling with an approved counselor from the U.S. Department of Housing and Urban Development (HUD)
- You must have the resources to pay ongoing costs such as insurance and HOA fees
In addition to these requirements, the home you’re getting a reverse mortgage for must be a single-family home, an approved mobile home, or an owner-occupied multi-family home (with 2-4 units). Some condo units are also eligible.
Your payment history and credit score will be evaluated, so it’s important that you’ve been making on-time payments for your credit card and other loans.
The best interest rate and monthly payment will be for borrowers with satisfactory credit, but you can still get a reverse mortgage with bad credit. The deal-breakers will be delinquent FHA mortgages or other delinquent federal debt.
When do you have to pay it back?
This is where reverse mortgages are a little different. You have to repay the loan (along with any fees) if you move out or sell the home. If you sell the home for more than you owe, you get to keep the balance.
If you need to move to assisted living, but your spouse is staying in the home and they’re on the loan documents, they don’t have to repay the loan yet.
The loan also needs to be repaid if you die. But again, if your spouse is a co-borrower, they can remain in the home and keep the loan as long as they keep up with the loan obligations.
If your partner is not a legal co-borrower and you need to move out or sell, they won’t be able to stay except under certain circumstances.
A reverse mortgage pays off your existing mortgage loan, if you have one. Bye-bye, monthly mortgage payments. Hello funds.
How much can you get?
The amount you can borrow with a reverse mortgage depends on a couple of factors, including your age. The older you are, the more you will be able to borrow. It also depends on your home’s price and current interest rates. While interest rates have risen, home values have risen, too, making it a good time to take advantage of these increased values.
For federal HECM loans, the limit on how much you can borrow is $970,800. Our Mortgage Calculator can help you figure out how much you can borrow.
Explore your reverse mortgage options with Fairway
Fairway Mortgage of the Carolinas is an established, well-respected reverse mortgage lender. We put our customers first and treat them like family, so you know you are getting the best service and support for your needs.
If you’d like to learn more about how you can benefit from a reverse mortgage, contact one of our mortgage specialists today. They’ll show you what you can expect and help you run the numbers, so you can begin enjoying your golden years the way they were meant to be—with peace of mind!