Even if you have a plan for your finances, unexpected events can still ruin all of your plans. Sometimes you may even consistently need extra money every month due to your current situation. Luckily, that is when reverse mortgages become a great option for you to consider. These can provide additional money every month, improve your quality of life, and even provide some financial security for qualifying seniors.
In order to better understand how a reverse mortgage could help your situation, you first want to understand what they are. Simply put, according to Investopedia, a reverse mortgage is a loan that allows its borrowers to “receive funds as a lump sum, fixed monthly payment or line of credit.” Not only can a reverse mortgage provide extra funds, but it is different from a traditional loan because the homeowner is not required to make any payments!
While this is an incredibly helpful option for homeowners, not everyone is eligible. Only those who are at least 62 years old, and close to paying off their home/paid off their home are eligible. You also will not be eligible if your mortgage is on a rental property.
When properly used, a reverse mortgage will be able to provide seniors more time for their retirement assets to grow which helps with delaying pension and social security payouts. According to Reverse.org, If you are interested in this housing option then you will want to meet these basic requirements:
- The youngest borrower is at least 62 years old
- The home is the primary residence
- The borrower(s) have enough home equity
- The borrower(s) meet the financial eligibility criteria set by the Department of Housing and Urban Development.
The Federal Housing Administration (FHA) will be able to determine the available amount of home equity that the borrower can used based on factors like:
- Interest rates
- Current property value
- Current Mortgage loan balance
- Age of the youngest borrower
If your plan is to stay put in your current residence, and you meet the criteria listed above, then a reverse mortgage could be a great tool for you to improve your situation. Make sure to consider a reverse mortgage when reviewing ways to get some extra money!