Is A Reverse Mortgage Right For You?

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June 1, 2021

We recently wrote an article on how maybe now is the time to make a large donation to loved ones due to federal inheritance and gift tax. The same can be true when considering a reverse mortgage.

In today’s Connecticut real estate market, property values ​​continue to grow. Plus, valuations are rising, which means seniors will now be able to get more funds through a reverse mortgage. If you already have a reverse mortgage, you may want to consider refinancing the loan.

Reverse mortgages continue to be one of the most misunderstood long-term and retirement planning tools. There are many myths surrounding the reverse mortgage program. Questions you might have are:

1. Will the bank own my property? NO! You will still be the owner subject to a mortgage.

2. Will the monthly payments be high? There are no monthly payments, only the payments you are currently paying, for example: property taxes, home insurance, etc.

3. Will the bank get my property and not my family if I die soon after getting the reverse mortgage? The bank will not receive a windfall. The mortgage will need to be paid and the balance will go to your family and / or your estate.

Reverse mortgages allow homeowners 62 years of age or older to borrow money for their home. The homeowner receives a sum of money from the lender, largely based on the value of the home, the age of the borrower, and current interest rates. There is no need to repay the loan until the last surviving owner dies, sells the house, or moves out permanently. Homeowners can use the money from a reverse mortgage to pay for improvements to their home, to allow them to delay enrollment in Social Security, or to pay for home health care.

The most widely available reverse mortgage product is Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). The national limit on how much a homeowner can borrow is $ 822,375.

Seniors with more expensive homes have an increased ability to secure a giant reverse mortgage in order to raise money for retirement. When the previous housing market improved, giant reverse mortgages became popular.

High-end borrowers should look to the jumbo reverse mortgage, which has no loan limits. Jumbo reverse mortgages allow seniors to borrow millions of dollars. Qualified borrowers can borrow up to $ 4 million in loan proceeds.

Reverse mortgages are “no recourse” loans; even if the home ultimately sells for less than the reverse mortgage amount, the seller never owes more than the home’s value. The amount to which seniors may be entitled depends on their age and the value of their home; the older they are, the more they can qualify.

John Luddy, senior vice president of reverse lenders at Norcom Mortgage, noted that one of the most compelling reasons to use a reverse mortgage is to pay for home care so you don’t work in a nursing home. He also noted that by using a reverse mortgage to pay for home care, hopefully you won’t have to tap into your own retirement accounts, which could compromise your own ability to pay for your future retirement needs. health care.

A reverse mortgage may not be the right step for everyone. Ask an elder lawyer if a reverse mortgage is right for you. A reverse mortgage can be the solution to help you get through these tough times.



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