You may have worked hard over the course of the last several decades to accrue a substantial amount of equity in your home, and you may now be in a position where you need to tap into that equity to support your retirement lifestyle.
When you retire, you generally need reliable streams of income that can support you and pay for all of your expenses. Social Security income is one common source that retirees rely on, but it often is not fully sufficient to meet most people’s needs. Because of this, you may also be looking at your home’s equity as another source of income. A reverse mortgage is a special type of mortgage that allows you to draw regular monthly payments of equity income out of the house.
Rather than you paying a mortgage company, the mortgage company will pay you. This situation may continue on until you move out of the home, sell it or pass away. This may sound like an amazing opportunity that you want to take advantage of, but before you apply for your mortgage, you need to know if you can qualify for this program. There are specific applicant and property requirements that must be met before your loan request can be approved.
The Requirements for Your Home
Because this type of mortgage draws from equity in your home, you generally need to have a substantial amount of equity available in the property. Most applicants do not currently have a loan on their property, but some may have only a small balance remaining on an existing mortgage. When you get a reverse mortgage, the current debt is eliminated. You can stop paying a mortgage payment, and you can have equity disbursements sent to you each month. This can have a truly beneficial impact on your budget. Single-family homes that are used as a primary residence and that have been lived in for at least the 12 months qualify for these mortgages. Two to four-unit multi-family properties also qualify for the reverse loan program as long as you live in one of the units. Condos also qualify for these mortgages, but farms that produce income do not. If you are not certain if your property would meet the qualification requirements, you can easily reach out to a loan representative to receive personalized advice about your options.
Personal Requirements for Applicants
This mortgage program is designed specifically for older homeowners. Therefore, all applicants should be at least 62 years old. While the applicants will not be responsible for making a mortgage payment any longer, they will still be responsible for maintaining the home. They should have enough money in their budget for home maintenance tasks as well as to pay the annual property taxes and insurance on the home. The underwriter will review income sources to ensure that these expenses can be paid for. Applicants will also be required to attend a seminar about these mortgages before the loan is processed and approved. The purpose of the seminar is so that applicants can fully understand how they work and so that they can get their individual questions answered in a live format by a knowledgeable professional.
Other Things to Keep in Mind
It is important to understand what happens to the mortgage and to the home if the applicant passes away or if he or she needs to be removed from the home to live in an assisted living facility or in another type of property. In some cases, a husband may own the home in his name, and he may pass away.
The wife wants to remain in the home, but the lender has the ability to take the home away. The lender usually will sell the home to pay off the outstanding debt. In cases such as these, the lender will typically provide the dependents with the opportunity to pay off the debt on the home and to take ownership of it. If this cannot happen, the dependents will need to move out of the home.
Because this is a possibility when both primary residents are not on the loan, the home’s occupants should be made aware of this potential outcome before the loan documents are signed. A reverse mortgage is an exceptional financial resource that gives homeowners the ability to access their equity and to enjoy a stable income stream for years to come.
Furthermore, they are not required to move out of the home or to sell it in order to benefit from accessing the equity. If you have been wondering how you will make ends meet in retirement or if you otherwise need access to your equity without being forced to relocate, applying for this type of mortgage is a smart idea. Reach out to a loan representative today to research this financial option more thoroughly.