Reverse mortgages, once considered to be the outcast of loans ,are slowly making a come back to the market. Lots of misunderstandings about the bank taking your home away and the kids getting nothing are more a misperception of the inner workings of the how Reverse Mortgages work. With the cost of living going up and the stock market on a volatile up and down trajectory, the Reverse Mortgage is a dynamic tool to take advantage of equity buildup to defer payments and/or generate additional cash flow. A Reverse Mortgage can also be used to purchase a property.
To qualify for the most common Home Equity Conversion Mortgage, or HECM, at least one spouse must be 62 years of age. The eligible loan amount is based on the value of the property and the age of the youngest borrower. Once determined, any existing liens on the property will have to be paid off and the HECM loan will go into first position. A few facts: there is no mandatory payment required on the loan, the client has to be an owner occupant, pay taxes and insurance and maintain the property, and the owner has full ownership and title to the property.
As long as the client lives in the property, there is no payment due. Should one of the spouses pass, the other one is still fully eligible to remain in the home. The HECM loan comes with a fixed rate option and a variable rate option. At the end of the journey, if there is any deficiency, i.e the loan balance is greater than the value of the property, then the client is not responsible for any loss to the lender. If there is equity then the heirs can sell the house and profit from the equity.
If you would like to explore whether a Reverse Mortgage is right for you, or learn about any other loan products, Please feel free to reach out to Dan Keyes, Kensington’s local Loan and Retirement Mortgage Specialist.
Dan Keyes
Loan Officer
Retirement Mortgage Specialist
619-665-3988
4134 Adams Ave, Ste 105, San Diego CA 92116
NMLS 232097