Reverse Mortgages

A reverse mortgage is a type of loan that allows you to borrow against the equity in your home without having to make regular monthly mortgage payments. Because regular payments are not required, qualifying is generally less dependent on your income than with a traditional mortgage. This is one reason reverse mortgages are often used by retirees.

Instead of making monthly payments, the interest is typically added to the outstanding balance of the mortgage. However, you can choose to make payments toward the interest if you want to limit the growth of the loan.

The mortgage is typically repaid when the property is sold, although there are other circumstances in which repayment may be required.

Reverse mortgage rates vary depending on the lender, the type of rate you choose and the length of the term.

Rates are generally higher than those available on a traditional mortgage. However, the difference may be less than many people expect, particularly when compared with other types of alternative financing.

Because reverse mortgage rates change with the market, it is best to contact me for the current rates and available options.

There are some costs involved in setting up a reverse mortgage, including an appraisal, legal costs and lender or administration fees.

The appraisal is generally paid upfront, while most of the other costs can usually be added to the mortgage so they do not have to be paid out of pocket.

Overall, the setup costs for a traditional reverse mortgage are generally lower than those associated with private mortgage financing. The exact costs will depend on the lender and the mortgage you choose.

When comparing your options, I will look at both the interest rate and the total cost of the financing so you have a clear picture of what you are paying.

A reverse mortgage can be used for many different purposes. For retirees, it is often used to supplement retirement income, maintain their lifestyle, pay off existing debts, cover renovations or unexpected expenses, or help children and other family members financially.

It can also be used as part of a real estate strategy. For example, the funds may be used to help purchase another property, upsize to a different home or purchase an investment property.

The important question is not simply what you can use the money for, but whether accessing the equity in your home is a sensible way to accomplish what you are trying to do.

With a reverse mortgage, you continue to own your home. The lender simply has a mortgage registered against the property, much like with a traditional mortgage.

Another important feature of many reverse mortgages is a No Negative Equity Guarantee. Subject to the terms of the mortgage, this means that when the home is sold, you or your estate will not have to repay more than the fair market value of the home.

Because regular mortgage payments are not required, any unpaid interest is added to the mortgage balance. This means the amount you owe will generally increase over time and reduce the equity remaining in your home.

How much you can borrow depends on several factors, including your age, the value and location of your home, and the lender’s guidelines. Generally, the older you are, the greater the percentage of your home’s value you may be able to access.

A reverse mortgage can be a very useful financial tool, but it is important to understand how the mortgage balance and your home equity may change over time. When I review a reverse mortgage with you, I provide projections using different mortgage rates and assumptions about future property values. This allows you to see how your mortgage balance and remaining equity could change under different scenarios and make a more informed decision about whether a reverse mortgage makes sense for you.

The next step is simple. Give me a call or leave me a note using the form below.

There are quite a few nuances to reverse mortgages, and it is important to understand both the benefits and the long-term costs before making a decision. I will take the time to understand your situation, explain how a reverse mortgage works and answer any questions you may have.

I will also compare it with other options that may be available to you, such as refinancing through a traditional, B or private lender, or using a home equity line of credit. The objective is to determine which financing solution makes the most sense for your particular circumstances.

If a reverse mortgage appears to be a good option, I will provide projections showing how the mortgage balance and your remaining home equity could change over time under different assumptions. This will give you a clearer picture of the potential long-term impact before you make a decision.

Want to see how this works in a real situation? Read my reverse mortgage case study [here] to see how I compared different financing options for a retired homeowner and helped determine which solution made the most sense.

My job is not simply to arrange a reverse mortgage. It is to help you determine whether a reverse mortgage is the right solution for you.