It’s hard to live on few hundred dollars a month. Retirees can turn to their home equity to help supplement monthly Social Security payments by taking out a reverse mortgage.A reverse mortgage is a loan that enables homeowners 62 or older to borrow against the equity in their home without having to sell their house or take on new monthly mortgage payments. Mortgage loan proceeds can be used for any purpose. They can be taken out as a lump sum, fixed monthly payments, etc.Reverse mortgages jumped by 77 percent nationally during the past federal fiscal year. There are several factors explaining this increase:
Household costs are rising;
Insufficient retirement income. Many retirees depend on Social Security, which often not cover all of their needs;
Increased awareness about reverse mortgages: TV ads and more mortgage lenders offering reverse mortgages.
Below we will show how a federally insured reverse mortgage works:
How much you can borrow from a lender depends on your age, current market interest rates and the value and location of your house;
The government sets interest rates and fees. Unlike other mortgag loans, it’s not a matter of shopping around for the best offer;
You must undergo mortgage counseling to make sure that this option works for you;
The re-payment amount can’t be more then the value of your home;
After the reverse mortgage is re-paid, remaining equity is forwarded to you or your estate;
The money you borrow from a lender can be used for in any case you want, including prescriptions, home improvement, travel, food, etc.!
Reverse mortgages doesn’t fit everybody. consequently you must keep following considerations in mind:
When you take out a reverse mortgage: your debt is increasing and your equity is decreasing. If you leave your home to your children when you pass away, this might be a problem;
Fees & costs related to your reverse mortgage can be financed;
A growing number of mortgage lenders are offering their own versions of non-federally reverse mortgages, sometimes with lower fees than federally insured programs.