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Is a reverse mortgage loan right for you?
If you’re a California homeowner nearing retirement, a reverse mortgage loan may seem like an attractive way to access your home equity. But is it the right choice for you? Before you decide, it’s important to understand the pros and cons. Reverse mortgages can provide additional income and are non-recourse loans, which means you or your heirs will never owe more than the home’s value. However, fees can be higher than traditional mortgages, and a reverse mortgage may impact your ability to leave your home to heirs. Consider your unique circumstances and reach out to us to see if this options makes sense for you.
Benefits of a reverse mortgage loan
A reverse mortgage is a type of loan that allows California homeowners to access their home equity without selling their homes. There are several benefits to consider. With a reverse mortgage, borrowers receive payments from the lender rather than making payments, and the loan is a non-recourse loan, meaning borrowers or their heirs will never owe more than the home’s value. Additionally, the loan does not need to be repaid until the last surviving borrower dies or sells the home. If you’re a California homeowner nearing retirement and need additional income, consider the benefits of a reverse mortgage and ask us if this would make sense for your unique financial picture.
- Never make another monthly mortgage payment
- Increase your cash flow
- Stay in your home
- Helps secure retirement
- Pay for healthcare expenses
- Enhance lifestyle, travel, and home upgrades
Reverse mortgage loan eligibility requirements
- At least 55 or older
- Loans up to 4 million!
- Equity in your home
- The home must be your primary residence
- Ability to pay taxes, insurance, and HOA
Contact us for more eligibility requirements and to see if this makes sense for your scenario!
What are the Pros and Cons of a reverse mortgage?
Pros
Depending on your needs and financial goals, a reverse mortgage may benefit you in the following ways:
- Pulling cash out is TAX-FREE! Learn more on IRS.gov
- You remain the homeowner, and your name stays on the title.
- You can access your equity without selling the home or making a monthly mortgage payment.
- There are no credit score requirements, though your credit history will be reviewed during a financial assessment.
- You’re protected from declining home values since it’s a non-recourse loan.
- There are no restrictions on how proceeds are spent. In other words, you can use the funds on whatever you want or need.
- Even after the borrower dies, non-borrowing spouses who aren’t listed on the mortgage may still live in the home.
- If the loan comes due because you pass away and your heirs wish to keep the home, they can purchase the home for 95% of its appraised value or the balance of the loan – whichever is lower. They can also refinance that cost into a traditional mortgage.
A reverse mortgage allows you as the homeowner to supplement your income for your retirement or other expenses. It’s also essential for you to know the eligibility and qualification requirements before settling on this option, as not everybody can use this loan. Before applying for this type of mortgage, we recommend speaking with a professional.
Cons
Although there are a number of benefits that come with a reverse mortgage, the loan can also have some points that you will want to consider.
- Since you’ll be borrowing against the equity in your home, you’ll decrease your equity and increase your amount of debt.
- If you choose not to make payments, the loan balance will increase over time as interest accumulates.
- Depending on the type of loan you choose and how you handle your money, you may outlive your proceeds.
- While heirs will have a few options for keeping your home after you pass away, you may not be able to pass the home on to your heirs without a cost to them.
- The loan may come due for several reasons. For example, the loan must be for your primary residence. If you do not live in the home for more than 6 months out of the year, the loan could come due. On the same note, a reverse mortgage will come due if you move out of the home or pass away. It could also come due if you fail to uphold your loan responsibilities, including maintaining the house and paying your property taxes and homeowners insurance.
- As stated above, you must continue to pay property taxes and homeowners insurance. If you do not stay current on these expenses, your loan may come due.
- There may be high closing costs and fees associated with the loan.
