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A Reverse Mortgage And A Home Equity Conversion: What To Know If you are getting ready to retire, you need to make sure you have income to support yourself during your golden years. One popular option is a reverse mortgage, and you can use it to supplement the benefits you receive through Social Security. On the other hand, you may have also heard about a home equity conversion mortgage. What are the differences between them, and which one is right for you?

A Reverse Mortgage

A reverse mortgage is a popular option because you can tap into the equity you have in your home to receive funds from a specific lender. In some cases, they will provide you with a single lump sum, but in other cases, they may provide you with monthly installments. You are not required to make any monthly mortgage payments, and you simply have to pay the money back when you sell your home. Your name will remain on the title of your home even as you tap into the equity to support your retirement. There are multiple types of reverse mortgages, and a home equity conversion mortgage is one popular option.

A Home Equity Conversion Mortgage

A home equity conversion mortgage is one specific type of reverse mortgage that is insured by the Federal Housing Administration. It provides you and your heirs with certain protection, and it is only available to borrowers who are 62 years of age or older. If you take out this type of reverse mortgage, you must use the funds to pay off any remaining balance you have on the original mortgage. Then, any funds that are left over will be provided to the homeowner. There are a number of factors that will dictate the amount of money you can receive. They include the age of the youngest borrower, the expected interest rate, and the national lending limit insured by the FHA.

Is This Option Right For You?

If you own your home outright, a reverse mortgage could be a great way for you to support yourself during retirement while also protecting any inheritance you passed down to your heirs. Consider reaching out to a professional who can help you decide if this is the right option to meet your needs.

Read This Before Signing Your Reverse Mortgage There are many reasons people take out reverse mortgages. However, this option is usually considered by cash-strapped seniors who own their homes and are looking to ease the burden of their golden years.

The beauty of reverse mortgages is that you’ll receive money as long as you are current on property taxes and homeowners insurance.

While this seems like an appealing opportunity, it’s a decision that should not be made lightly. Not only is the reverse mortgage complicated in itself, but homeowners make all sorts of mistakes when they’re too quick to sign the dotted line. So if you’re considering one, be wary of the common pitfalls below.

Buying Into A Scam

With reverse mortgages becoming a more common option for those over 62, mischievous opportunists are searching for ways to solicit seniors in need of help. Scammers will take advantage by charging high fees, funneling off parts of payments, creating fake loans or committing identity theft. Ensure you use a lender approved by the Federal Housing Association.

Confusing Your Payment Options

Reverse mortgages come in many forms. You can get the amount in one lump sum. Tenure payments are another option that give you a certain amount each month until you die or move out. There are also term payments, lines of credit, and modified tenure and term payments. You need to take the time to research your options and decide which one will be best for you in the long run.

Compromising Government Assistance

There are several government assistance programs that set asset limits on your monthly spending. These programs provide aid for low-income and disabled individuals. If any assistance programs financially support you, then be sure to consult their advisers before determining your reverse mortgage plan.

Disregarding Other Options

Reverse mortgages are extremely expensive and many people see them as their only option. However, there are other alternatives. Consider taking out a personal loan, downsizing or even taking on roommates. The Golden Girls always seemed to have fun.

A reverse mortgage could be just the thing to give you the extra cash flow you need and ease your mind. However, make sure you’re consulting a trusted home financing specialist, reading the fine print and have carefully considered all your options.

A Reverse Mortgage And A Home Equity Conversion: What To Know

Important Things To Know Before Signing Your Reverse Mortgage

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