Reverse mortgage is a buzzword in the real estate industry that many homeowners don’t really understand. Homeowners in the Kansas City Metro Area are in luck—First Fidelis, a mortgage lender serving the Kansas City area, is here to help you understand just what a reverse mortgage is and how it can benefit you.
What is a Reverse Mortgage?
Also known as Home Equity Conversion Mortgages (HECM), reverse mortgages allow seniors over the age of 62 to leverage the equity in their home to pay other bills, cover healthcare costs, pay off debt, pay for home repairs, supplement income, or live in their home without mortgage payments.
If you meet the age requirement for a reverse mortgage and own your home or have a low balance left on your existing mortgage, you probably qualify for a reverse mortgage. Reverse mortgages allow you to live in your home without a monthly mortgage payment by granting you a loan in which the lender pays you. The money you receive from the lender is usually tax-free, and you can receive it as a lump sum, monthly payment, or line of credit.
There are three different types of reverse mortgages that you may qualify for. Single-purpose reverse mortgages aren’t available everywhere, but they stipulate how you can spend the money you get back on your loan. Proprietary reverse mortgages are private loans. Lastly, Home Equity Conversion Mortgages, the most common type of reverse mortgage, are federally-insured and backed by the U.S. Department of Housing and Urban Development.
Each type of reverse mortgage has its own set of pros and cons, but there are some common benefits and problems with each.
Benefits of a Reverse Mortgage
If you meet all the requirements for obtaining a reverse mortgage, consider the following benefits that one can provide you with:
- You still own your home, but your equity is turned into cash that you can use for whatever you wish.
- The loan doesn’t need to be repaid until you sell your home, move out, or pass away, and you don’t need to make any monthly payments.
- You can’t owe more than what your home is worth.
- Your reverse mortgage is insured by the Federal Housing Administration.
- A reverse mortgage won’t affect your Social Security or Medicare benefits.
- Almost everyone aged 62 and older is eligible as long as you own your home or have a low balance on your mortgage.
Problems with Reverse Mortgages
Reverse mortgages aren’t for everyone. Here are some common problems that some people have with reverse mortgages:
- Reverse mortgages can take a lot of equity out of your home, which leaves fewer assets for you and your heirs.
- A reverse mortgage can’t be used on a home that isn’t considered a primary residence.
- If there is more than one borrower, age is determined by the youngest borrower, so while you may meet the age requirement, your spouse may not, which makes you ineligible.
- Upfront costs for a reverse mortgage tend to be higher than traditional home loans.
- You may be required to pay for additional expenses such as homeowner’s insurance, flood insurance, and property tax out of your payouts.
If you are considering a reverse mortgage, call First Fidelis at 913-205-9978 today to start the process. First Fidelis makes getting a reverse mortgage easy. We have mortgage loan experts that can help you through the process. If you have any questions about getting a reverse mortgage, call us today.