A reverse mortgage is a mortgage designed for seniors who are 62 years of age or over which allows the borrower to convert a portion of their home equity into cash. So if you have owned your Walnut Creek home for awhile and need extra cash right now, a reverse mortgage might be the perfect solution for you. There are no mortgage payments required until the last borrower passes away, moves or sells the home. The only requirements are that the borrower must reside in the property as their primary residence, pay their property taxes, have property insurance and maintain the home. The loan is paid when the home is sold by the borrower or their heirs.
What You Should Know?
The FHA Home Equity Conversion Mortgage (HECM) is a favorite reverse mortgage product among seniors because it has lower fees than a standard reverse mortgage. Seniors can use the cash from their home’s equity to supplement their social security and other income or for emergencies, home improvements and repair or other family expenses. The only fee is a nominal monthly service fee ranging from approximately $30.00-$35.00 for managing the account.
HECM Eligibility Requirements:
- Borrower must be 62 years of age or older.
- The home must be the primary residence of the borrower. It can be a single family home or 1-4 unit property as long as the borrower occupies one of the units. HUD approved condo buildings or manufactured homes also qualify for a HECM reverse mortgage.
- All borrowers are required to receive credit counseling from a HECM counselor prior to receiving their loan.
Private reverse mortgage requirements are similar to the HECM. With private standard reverse mortgages you pay higher fees. You should work with a mortgage broker to find the best mortgage rates and product. You Walnut Creek Realtor will be happy to refer you to a Walnut Creek lender or mortgage broker.
What to Watch Out For?
There are a few things you should watch out for when obtaining a reverse mortgage:
- Large upfront fees and costs
- Crooks and scams that prey on seniors. Only work with reputable lenders and mortgage brokers.
- Avoid reverse mortgage products with high interest rates or high monthly service fees.
In today’s tough economic times, reverse mortgages are helping many seniors convert the equity in their homes to give them extra cash and flexibility in their lives so they have a cushion to fall back on for living expenses, emergencies or just to use to enjoy their retirement.