With the aging population, it’s likely that reverse mortgages will gain prominence in the real estate landscape. If you fall into this population, you may find that yourself becoming more interested in this option.
A reverse mortgage is as it sounds: A lender will make payments to the homeowner during his or her lifetime, then take ownership of the property once the borrower dies or sells. The point is that the borrower moves permanently from the property.
Payments may come from the lender in one of several forms, including a one-time payment of the entire balance, fixed installments over time, or some type of line of credit.
The minimum age to obtain a reverse mortgage is 62. If a married couple applies, both must be at least that age. The amount that borrowers can access is based on their ages and the equity in the property. For example, an 85-year-old who has paid off his or her mortgage can borrow a higher dollar amount than a 65-year-old with even a small mortgage.
Due to market fluctuations, lenders will only provide a certain percentage of the market value, regardless of the age of the borrower. Any existing mortgages and other liens will be paid off so that the reverse mortgage becomes the only lien on the property.
Despite many benefits, reverse mortgages can be extremely expensive to obtain. Different payout options will carry different interest rates, and they can vary greatly. Talk to me about the right option for you.