Is A Reverse Mortgage Right For You?
If retirement is on the horizon or you’re already a retiree, financial security is likely a concern. Stepping away from a career (and the consistent paycheck that comes with it) may require a comprehensive strategy to ensure your golden years are adequately funded.
One of the tools many people turn to in retirement is a Home Equity Conversion Mortgage (HECM). Also known as a reverse mortgage, these loans allow an individual to turn their home equity into a lump sum, monthly payments or even a line of credit after the age of 62. Your financial advisor and our loan originators can you help you determine what’s best for your personal situation, but keep the following guidelines in mind if you’re considering a HECM and aren’t sure if it’s right for you.
A HECM Covers Only Primary Residences
This unique government-insured* loan can only be used for a home owner’s primary residence. That means a vacation home, rental property, or second home is not eligible. And, if you obtain a reverse mortgage on your main residence, moving out of it for more than a year will result in the bank ending the loan.
And Some Exceptions To The Rule
While most primary residences will be eligible for a HECM, there are a few exceptions. Properties without a foundation, or not considered permanently attached to the land, such as a mobile home, are excluded.
While a condo would likely meet the requirements, if you live in a co-op like those sometimes found in New York and other large cities, you will be out of luck. Owning just a share of the building rather than the actual property disqualifies them. Similarly, while a duplex or other small multi-unit housing may qualify, buildings with more than four units will probably be deemed a commercial property and become ineligible.
Assuming your property qualifies, there are other considerations to keep in mind when deciding if a reverse mortgage is right for you. The home will need to be appropriately insured, maintained, and the property taxes paid in full throughout the term of the loan.
Whether 62 is just around the corner or has already arrived, Open Mortgage can make sure you’re asking the right questions. Discover all the mortgage options available to make the most of your retirement by calling us at 888-602-6626.
*Open Mortgage, LLC and it’s DBAs are not acting on behalf of or at the direction of the federal government.
Things to know about Reverse Mortgages:
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
- The loan balance grows over time and interest is charged on the outstanding balance
- The borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment