When To Do Reverse Home Mortgage

Home Ownership brings a great deal of benefits. One being, you can elect to take the equity you’ve built up out of your house. A vehicle for this in your later years is a reverse mortgage.

Why The Fear Factor .Doing A Reverse .Mortgage

It’s no joke.

Many Boulder homeowners who might be ideal candidates for a reverse home mortgage do get scared. Number one fear? What others might think. And yet, the loan that is usually advertised on late night news tv channels can be a good opportunity for some candidates.

For instance, if you have no children to leave your house to, perhaps you’ll want to tap into that equity to allow yourself to retire in your own home. Or maybe your children are not counting on you for an inheritance. So why not use the equity you acquired to remodel your house? Or get an important health surgery to continue to live your best life. A reverse home mortgage allows you to tap into your home’s equity.

You need merely overcome the fear of what others will think. I’ve heard this is one of the biggest fears when it comes to getting this type of home mortgage.

How Does It Work Having A Reverse Home Mortgage?

After you complete the loan process and close, you no longer have a principal or interest payment for your home. You do continue to have a payment for taxes. And you any Homeowner Association fees. Plus you need to maintain the property in good condition.

This isn’t to say there isn’t any interest. It’s just that the home owner is not paying it. When the owner dies or moves out, the interest is calculated and comes due immediately.

boulder famous rock park features throwback carousel toy and a gem -of a climbinsg structure made out of little caves and paths.
The Boulder Rock Park is a beloved playground east of Foothills parkway in Boulder, Colorado.

Some people getting a reverse home mortgage opt for a single lump sum payout. Others can qualify for a continuing monthly payment. It all depends on factors such as your equity, credit history and even your age. You might instead have a line of credit attached to your home. Or even all three options at once.

Generally speaking, you need to be at least 62 to get this type of financing.

The most common sort is a Home Equity Conversion Mortgage (HECM). Since the owner is getting funds out – either over time or in a lump sum – the note is increasing over time. Most mortgages get paid off and decrease in debt over time.

What Do I Need To Know Getting A Reverse Home Mortgage?

Anything sounding this good, does come with some limitations. You need to qualify for the financing, just like any other Boulder home mortgage. And if you ever sell, you’ll need to pay off the reverse home mortgage. Or, if you no longer live in the home, the mortgage comes due.

bob gordon and john arnold and beth & frank in a real estate closing
Pictured: (L to R) Bob Gordon, Realtor; John Arnold, Mortgage Banker, Beth and Frank. John is familiar with HECM and CHFA mortgages. HECM is the most common type of Revere Home Mortgage.

The most common notes – HECM – are backed by the Federal Housing Authority aka FHA. There are conventional options, but be sure to do your due diligence to avoid scams. Me? I would definitely work with a lender offering an FHA backed note.

There are many fees associated with your reverse home mortgage. Lenders can charge a monthly service fee. This might be on the order of $25 to $45 a month. You’ll also have an origination fee when the loan is created; this is one of your closing costs.

Title fees, credit checks, even an appraisal are all part of the closing costs associated with your reverse note. And being a Federally funded loan product, expect to have mortgage insurance premium.

Don’t forget, you still need to pay your property taxes each month and the HOA fees. You’ll also absolutely want to maintain your Home Owner’s Hazard insurance. Especially when you recall it was just the end of 2021 when the Boulder area suffered it’s worst natural disaster ever with the Marshall Fire taking over 1,000 homes and structures.

One tricky thing to remember, residing in the property is required. Let’s say you have to move, maybe to live in assisted living for health reasons. If you have a non-borrower spouse living with you, that person might need to vacate, and the property be sold. So really review your situation first with a qualified mortgage professional.

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