Retirement age homeowners who feel that social security and insurance are simply not cutting it for them may be considering a reverse mortgage. You should give up your home, but you can live in it. While a reverse mortgage may boost retirement, it has some downsides – although they have less power than previously due to some changes over the past few years. So what’s a reverse mortgage and you should get one as a homeowner of Philadelphia
What Is a Reverse Mortgage?
A reverse mortgage and a conventional mortgage are both home-backed loans to be paid back to the borrower. You get all the money up front with a traditional mortgage and interest starts immediately, payments are made monthly until it is paid off. On the other hand, with a reverse mortgage, you use the equity of your house to get the loan. You collect the funds either in a lump sum or in monthly installments or as a credit line. There are no monthly payments, and when you sell or die, you pay off the loan. Usually, the Federal Housing Administration (FHA) funds a reverse mortgage and is supervised by the Housing and Urban Development Department (HUD).
Specially for older people, usually in retirement, reverse mortgages are anticipated. A reverse mortgage allows them to increase their monthly cash flow by using their home equity. And with monthly payments, it doesn’t burden them.
Who Can Get a Reverse Mortgage?
Qualifying borrowers must be at least 62 years of age. They also have to submit to a home counseling session to ensure that they fully understand everything that entails.
A primary residence must be the house whose equity is used to fund the mortgage. You are also not allowed to borrow more than 80% of the value of the home. You still have to pay insurance, property taxes and mortgage insurance to keep the home.
Reasons to Get a Reverse Mortgage as a Philadelphia Homeowner
It’s a good reason to get a reverse mortgage if you need the money to survive at a decent level. Social security does not stretch very far, and the gap can be filled with a reverse mortgage. And the income from a reverse mortgage you receive is often tax-free.
Often, when you earn monthly payments, you can live in your house. Certain retirement funding options also allow you to sell your home to decrease or move to a place where you can live cheaper.
So if cash is the main concern, it can be a reverse mortgage for you as a homeowner Philadelphia.
Who Shouldn’t Get a Reverse Mortgage
Reverse mortgages, as we have described, have certain drawbacks. And if these disadvantages outweigh the pros for your case, it may not be a good idea for you to have a reverse mortgage. Consider the following . . .
- Depending on your age, the value of your home, the amount of equity, and other factors, a reverse mortgage may not give you as much money as you actually need.
- There will be closing costs, just as with traditional mortgages, and interest rates are typically higher with reverse mortgages – added back to the loan balance.
- If you have to leave your home for some reason, you’ll probably have to sell it to pay off the loan. And that means you won’t be able to leave your home to your family – unless you can find out another way to pay the reverse mortgage.
- The reverse mortgage can affect your eligibility for additional benefits that are required, including SSI and Medicaid.
HOW TO DECIDE
As a Philadelphia homeowner, reverse mortgage could be the ideal solution for you. But maybe it won’t be. When making a decision you must weigh the pros carefully against the drawbacks. Consulting a financial advisor as well as a local real estate agent is also a good idea. While your agent is unable to advise you on financial matters, she can help you understand how your home ownership is affected by a reverse mortgage. Just be sure to consider any alternative income. Call us today at [ phone ] to know more about reverse mortgages.