Mortgages Made Simple
Would someone explain a reverse mortgage to me in simple terms?
Many have heard about Reverse Mortgages but often bits and pieces of information can be confusing. In a nutshell, you put money into your home over the years by paying a mortgage. A reverse mortgage allows you to take money out of your home but you are not required to make a monthly payment. The best way to describe it is as a deferred repayment loan. The repayment of the loan takes place after the home is sold or an heir refinances or purchases your home after passing. You paid into your home’s equity for many years, now you can draw on that equity to help fund your retirement but you don’t have to make a monthly payment. That is the basic concept of a reverse mortgage.
I am struggling to just pay my mortgage. Can a reverse mortgage help?
If you are age 62 or older and have enough equity in your home, you may qualify for a reverse mortgage which can pay off your existing mortgage. This, in essence, halts the payment on your mortgage. Keep in mind that annual property taxes and insurance may still need to be paid but you will not have to continue to make that forward mortgage payment each month.
I have excess money from my reverse mortgage. Are there restrictions on its use?
No, you don’t have any restrictions. You can purchase a second home, time share, motor home and tour the country, pay medical bills, invest in companies, put money in the stock market, etc.
If I get a reverse mortgage, do I have any future costs associated with my home?
Yes, you must continue to pay annual property taxes and maintain home owner’s insurance, often called hazard insurance to protect your home in the case of fire, etc. Additionally, you need to keep your home in good condition. Just so you know, there are often county programs which provide for a decrease in property taxes for seniors and disabled veterans. Contact us for details.
Are there any fees when getting a reverse mortgage?
Yes, there are appraisal fees, mortgage insurance fees, processing fees, title fees and other fees. For an estimate, which we always recommend you get as part of the decision making process, call us and we will prepare and send you the fee breakdown. Of course there is no cost for this. Actually, the only cost that typically comes out of your pocket throughout the transaction is the cost of the appraisal to value your home.
Are there pitfalls to reverse mortgages?
In a recent article by AARP, there are a couple of examples of people who struggled financially even after they got a reverse mortgage. Go to AARP and search reverse mortgage or click the link below. If you are in a very dire financial situation, one question you need to ask before getting a reverse mortgage is, “Are there any other alternatives available to me? If you have plenty of retirement funds saved for the long haul but would like to fund additional opportunities such as purchasing a large motor home to travel the US, purchase a large boat to sail around the world or even a second home, a reverse mortgage may be an opportunity for you to do so and not worry about depleting your invested assets or taking out a loan which requires repayment for years to come.
Reverse Mortgage Special Pitch:
Many people dream of seeing the US in a motor home, buying a boat and sailing the world, buying time shares in fantastic locations or even second homes or small ranches to divide their time and provide opportunities for grandchildren and even great grandchildren. Many seniors are even contemplating purchasing small businesses to keep them busy and follow their dreams of business ownership. A reverse mortgage can help fund these worthy endeavors. I am old school, if you have questions, call me and let’s talk about it. Just like our parents taught us, it never hurts to ask questions. Give Jonathan a call at 801-448-3800 to set up an appointment or to talk on the phone.