Reverse Mortgage Solutions
In the recent economic situation, a large number of seniors find themselves either unable to conveniently meet their required monthly payments or need extra income to their personal obligations. It may, however, not be a wise option to sell a home in such a falling real estate market. Using the equity in your home through a reverse mortgage is an excellent solution.
A reverse mortgage is a loan that is drawn on the equity in the home. It gives seniors a stream of income while they can still stay in their homes. A repayment is not required until the borrower does not occupy the home again or the home is sold. When the home is sold, any residual equity is paid to the borrower or heirs if the borrower has passed on. The borrower can by no means owe more than the estimated value of the house. The borrower retains the title to the home. Meanwhile, the borrower is expected to pay the taxes, insurance, and maintain the home.
However, a reverse mortgage provides solutions in the following ways:
- A reverse mortgage makes it possible for seniors to acquire a new home with just about 40% down payment. If you have a home in Florida that is worth about $450,000, and you want to buy a home in New Jersey where housing prices are high, you would need about $240,000 to purchase a home of $600,000 if you are at least 62 years old.
Sell your current home and apply the proceeds as the down payment for the new house. If you already have the down payment, you do not have to sell your current home in Florida. You just need to buy the new home in New Jersey with the reverse mortgage and live there for about 6-7 months and return to New Jersey for 5-6 months. The requirement is just that the house with the reverse mortgage (New Jersey) is your primary residence.
- Another way to guarantee your financial future is the line of credit. This is available on the adjustable rate program having both short-term and long-term benefits. Using the last example, and say that you are living in a home that is worth about $450,000, and you are 62 years old. Currently, the house does not have any mortgage balance outstanding, and you are planning living there for the rest of your life. Using reverse mortgage, you would be eligible for about $225,000 in the line of credit option. The benefit of the line of credit is that the amount not withdrawn will grow by about 3.5% annually.
- The last solution is to accept the fixed rate option which allows you to remove the proceeds in a single lump sum. Using the same example, you would qualify for about $225,000 in proceeds. $135,000 of the proceeds would be available in the first 12 months, after which the remaining balance of $90,000 will be available. There are quite some things you could use the fund for- medical expenses, a new car, a grandchild’s education, etc.
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