As a homeowner, your residence provides more than just shelter—paying off your mortgage allows you to build equity. You can use that equity in different ways, which can prove key for financial matters like investing and retirement planning. One way to do so is to take out a reverse mortgage. People who qualify can use this as an opportunity to gain significant funds at a time when they are preparing to retire. While it is often used to help with post-work plans, you have control over what you receive, and you can put it toward other purposes.
FHL Texas can help you understand how this type of support might help you with your long term plans. We can also provide important information on what your terms do and do not require. One important note is that taking a reverse mortgage is not the same as selling your property. Your name remains on the title, so you keep control over your space and still have the ability to renovate or sell if you so choose.
What Makes A Reverse Mortgage Different From Other Types Of Home Equity-Backed Support?
There are different forms of financial support you have access to as someone with home equity. Equity loans and HELOCs provide different advantages, and they are available to younger borrowers. There are different requirements for a reverse mortgage, including the requirement that everyone whose name is on the title be at least 62 years of age. Others concern how payments are given, whether there are charges that need to be paid back during the life of a loan, and the conditions linked to the property.
How Can I Qualify For A Reverse Mortgage?
Until you are 62 years old, you will not be eligible for a reverse mortgage. With that said, the age requirement is not the only one you should know about. While you do not need to own your home outright, you should have at least 50% equity and be prepared to pay off the existing mortgage. You should also be prepared to keep up with remaining payments like property taxes, utilities, and HOA fees while keeping the space in good condition. Moving out and selling the home is still an option, but doing so will end the loan and make repayment necessary. For this reason, a reverse mortgage can be more appropriate to someone who intends to remain in their current residence for the foreseeable future.
How Will My Reverse Mortgage Be Paid To Me?
Different forms of payment are available to you. Traditional monthly payments are often awarded, which can help you keep a stable income flow after you finish working. For those who want more money up front, more can be awarded in the first year of the loan. A reverse mortgage line of credit, like a HELOC, lets you receive a credit line that you draw from. When you choose this option, the sum awarded by your reverse mortgage will grow at a steady rate until you draw from it.
What Can I Do With The Funds From My Loan?
Because reverse mortgages are only awarded to people starting at the age of 62, many think of it as part of their retirement strategy. Using this nontaxable support at a time when you plan to stop working can certainly be beneficial. With that said, you are limited limited to only seeing your loan as a means to support yourself when you stop working. The money can be used in ways that make the most sense for you. That can mean using it to make new investments, renovate or repair your home, travel, or cover medical costs.
Do I Still Own My Home If I Take This Kind Of Support?
Your home title will remain in your name after you take out your loan. What you borrow against is the equity that you have built up; you are not making a de facto home sale to receive your funds. You can still choose to leave the property to an heir or even move as long as you are prepared to close the loan without the need to pass the dead to your lender.
One thing to remember is that while you will not have monthly mortgage payments, you should still be able to cover remaining home costs. Failing to keep up with property taxes, utilities, necessary home repairs, and other expenses can affect your ability to maintain your reverse mortgage.
How Will My Choice To Receive A Reverse Mortgage Affect My Heirs?
Many people will choose a reverse mortgage and allow their lender to take possession of the title when they are no longer a resident in their home. You can choose to do so as part of your long-term plan for your loan, but you do not have to pursue this option. As long as the loan is covered, the passing of the title is not required, so you can still pass it on to your heir.
Talk To FHL Texas To Learn More About Reverse Mortgages And How They Can Help You
There are different reasons why people pursue reverse mortgages and different ways in which they can be awarded. Having the right information and support can make it easier to determine if this is something that can benefit you and what to expect from what you are offered. For more information on how we can help you, call FHL Texas today at 1-800-990-LEND (5363).