A reverse mortgage, also known as a conversion mortgage, is basically a mortgage loan, normally secured by an existing residential property, which allows the lender to access the underlying property without incurring any additional debt. The loans are generally targeted at elderly homeowners and thus do not often require monthly repayment. With this in mind, you can convert a reverse mortgage into an improved interest-only or fixed-rate mortgage. If so, your Reverse Mortgage Lenders San Diego can provide a higher-paying monthly return than an interest-only mortgage.
Besides providing an improved return on investment, you could use your reverse mortgage to address many other financial needs, particularly if you or one of your heirs has experienced a financial loss. You could refinance to take advantage of low-interest rates, thereby lowering the cost of borrowing against your equity. You could also use your equity to pay off any debts, such as credit card debt, which has become a burden. This would allow you to free up some funds for home repairs and improvements, which can help an economic slump. Alternatively, you could use the cash generated from your reverse mortgage to undertake major home repairs or renovations. This would give you significant cash to make these improvements, such as installing new flooring or roofing, replacing windows and doors, etc.
Another possible downside of a reverse mortgage might be that your heirs will have limited ability to use the funds for their own needs. As a result, the loan might have to be repaid early, which could be a challenge for several reasons. For example, the reverse mortgage might only allow you to borrow the principal amount and not the interest. The remaining balance, usually known as the ‘back taxes,’ can only be paid out of income tax. Besides, Medicaid and Medicare benefits are usually not available to borrowers who are 65 years old or over.
If you are considering taking out a reverse mortgage, you should consider several things. First, do you currently qualify for a loan? In case you don’t, you may want to consult with a certified public accountant, or CPA, to assist you in determining whether or not this type of loan is right for you. For most homeowners, it is not a problem to apply for a reverse mortgage. To qualify, you need to meet a few basic requirements.
The primary reason you might consider taking out a reverse mortgage might be to raise money for a wide variety of expenses. This could include paying off debts, building a new home, or remodeling. The money raised from the reverse mortgage might be used to pay off these debts. However, the homeowner would only be allowed to borrow against the equity on his or her home. Therefore, if you were to sell your home, you would not borrow against the equity.
A second reason that you might consider a reverse mortgage might be to convert the remaining balance on your home equity into cash. This can be accomplished by getting a federal HAMP (home affordable program) loan. This type of loan allows you to convert an FHA (Federal Housing Administration) loan or a VA (VA home loan) into cash. You must have owned your home for at least five years, and you need to have built the home yourself.
There are several downsides to taking out a reverse mortgage, however. First, you will have to pay taxes on any income you earn during the lifetime of the loan. This can be a substantial tax burden. Secondly, you will be responsible for paying insurance premiums on the loan. And finally, you will be responsible for making the monthly payments on the loan, although your monthly payments may vary based on your current financial circumstances.
While there are several downsides to taking out a reverse mortgage, they do present some advantages. First, you will be able to fund additional debt, which will give you a nest egg for the future. Most importantly, you will not have to deal with ongoing payments associated with your first home equity mortgage. This can mean big savings over the long term. All in all, if you are planning to remain in your home for the long term, a reverse mortgage may be a great choice.