When most of us think of a mortgage, the first thing that comes to mind is a long term expense. That’s natural, after all – for plenty of people, a home loan is the largest and most extended bill they’ll pay in their lives.
As it turns out, though, there are situations where mortgages can give back. For retirees and seniors in need of a little extra cash, one of these options is a reverse mortgage, one of several services we offer to our clients at Altius Mortgage. Instead of paying money to a mortgage each month, people in a reverse mortgage actually receive money that they can use for other necessary purposes.
How does a reverse mortgage work, and might it be right for you? Let’s find out.
A reverse mortgage, also sometimes known as a home equity conversion mortgage (HECM – this is actually just by far the most common type of reverse mortgage, but others are very rare), is a home loan designed for people over the age of 62. It involves the loan lender taking on monthly payments rather than the borrower, and the loan is later repaid once the borrower either passes away or moves out of the home.
Borrowers still do have to pay homeowners insurance and any taxes or maintenance fees on their home, but they’ll receive payments that represent their equity in their home each month. There are fees attached here as well. Borrowers can receive their money in a lump sum, as a line of credit or as a monthly payment.
There are several ways a reverse mortgage can benefit you:
There are a few potential drawbacks you’ll want to be aware of before you go down the road of a reverse loan. Fees are high, as are mortgage rates. You do have to repay the loan if you move out before you pass away, and you’re still responsible for all other home costs. Most importantly for some people, a reverse mortgage often means your home will not be passed on to future generations in your family once you die. For many people, the benefits of reverse mortgages exceed these risks, but for others they may not.
Ready to learn more? Our brokers at Altius Mortgage are standing by to assist you.