A reverse mortgage is a loan for people age 62 or older, created so homeowners can convert their equity into cash, with no monthly mortgage payments. The first reverse mortgage, known as a home equity conversion mortgage, or HECM, was introduced in 1989. These loan are insured by the FHA, or Federal Housing Administration, up the the Fannie Mae and Freddie Mac loan limit of 679,650 in high cost areas, such as most of the San Francisco bay area.
Reverse Mortgages make sense for those who:
- Don’t plan on moving
- Want to supplement their income using the equity in the home
- Can afford to maintain their home
There are no restrictions on what people use the money from a reverse mortgage for. People with adjustable rate reverse mortgage can collect their equity payments as a lump sum, a fixed monthly payment, a line of credit, or as a combination of each. Those that close on fixed rate reverse mortgage will receive a lump sum.
Some of the pros of a reverse mortgage are: no monthly payments, proceeds can be used as you wish, you can pay off your existing mortgage with the proceeds, and the funds can increase monthly cash flow. Some of the cons are: one must continue to maintain their home, pay property taxes and insurance. Having a reverse mortgage may also complicate how you pass along your property to your heirs, and should be considered.
Generally, the older you are and the more value your home has, the larger your reverse mortgage can be. At CA Mortgage Pro we have many years experience helping people secure reverse mortgages. If you have any questions about reverse mortgages, please do not hesitate to contact us today.