When and How to Take a Reverse Mortgage

Mark DiMercurio | August 20th, 2015

For the elderly, at least 62 years old, considering to use a reverse mortgage to finance improvements in your home, to pay off a current mortgage, to increase your retirement income or to pay for your health expenses could be the best financial decision that could see you make savings on additional monthly bills or even convert a part of your home equity into cash without necessarily selling your house.

reverse mortgage is a product that enables you to receive money from the lender in contrast with the regular mortgage where you are the one paying money to the lender. As long as you are alive and living in your home, you can take a reverse mortgage which you don’t have to pay back as long as you will continue living in your home. This loan will be repaid once you die, once you sell your home or once you are no longer the primary owner of your home. This is a very effective way to get some cash since it is relatively tax free and it doesn’t have income restrictions. Reverse mortgages come particularly in three types, single-purpose, federally insured and proprietary reverse mortgages.

Single reverse mortgages are the cheapest. However, they are not available in each and every place and they are only provided to undertake just a single purpose. This particular function of this reverse mortgage is clearly specified by the government or your lender. For example, the lender may specify the mortgage to be used only in payment of taxes or only in the repair of homes. You cannot therefore use this mortgage for other purposes. Single-purpose mortgage is available to homeowners with a relatively low income.

Proprietor reverse mortgages can be a bit costly than traditional home loans and the interests can be higher as well. The advantage of this reverse mortgage loan is that it is widely available, have no income requirements and can generally be used for any purpose. You will have to consult with your mortgage lender before applying for this particular loan.  He is required to clearly interpret the loan costs and possible financial implications that might follow.  Similarly, he or she can advice you on better alternatives to the proprietor loan. Several factors will contribute to deciding whether you can be given this type of reverse mortgage and they include age, appraised value of your home, type you need and the market interest rates.

Anytime you are considering taking a reverse mortgage loan, always put in mind that every lender will charge you an origination fee, insurance premiums as well as other closing costs. You might also be charges servicing fees during the mortgage term. Similarly, know that the amount you owe the lender constantly grows over time and the interest is always charged on the balance and added to the loan you owe monthly. Most reverse mortgage loans have fixed rates while others have variable rates which change with changes in the market. Furthermore be aware that a reverse mortgage could use up all or part of your home’s equity thus leaving few or no assets to your heirs.

If you live in the Bay Area cities such as  Brentwood, Discovery Bay, Oakley, Antioch, Pleasant Hill, Concord, San Ramon, Tracy, Walnut Creek or Danville and would like help witht your options for a reverse mortgage give Delta Lending a call 925-513-0444 or use the contact us form on our website.