If you are a retired homeowner in Grand Rapids who could use a financial boost, you should consider a reverse mortgage. A reverse mortgage is an FHA insured loan. Read on to learn some things you should know about reverse mortgages.
All you have to do is make your home your primary residence for 6 months to a year, keep paying your homeowner’s insurance and real estate taxes, and keep the property in good condition.
Your current mortgage and mortgage payment are eliminated
You can use a reverse mortgage to pay off your existing mortgage. There is no monthly payment on a reverse mortgage because the loan, including principal and interest, is paid off once the home sells. The amount you owe increases over time, and the interest accrues based on the outstanding balance.
You don’t have to repay the loan until you vacate
The reverse mortgage is only due when your home sells, or when the last surviving borrower either passes away or fails to live in the home for 12 consecutive months. Once the home is sold, the reverse mortgage must be paid off, but any excess from the sale is yours to keep.
You can buy your principal residence by using a reverse mortgage
All you have to do is be able to pay the difference between the reverse mortgage proceeds and the selling price of your home.
The money you get from a reverse mortgage is usually tax free
The proceeds from reverse mortgage loans are not viewed as taxable income. This means that neither your Social Security nor your Medicare benefits will be affected. However, you should check with your tax professional, because the proceeds may affect your eligibility for some other programs.
You can distribute the money as you choose
It’s up to you whether you want monthly payments, a lump sum, or an ongoing line of credit. Also, you can use the money however you like. You can weigh your options by using a free online reverse mortgage calculator.
There are no prepayment penalties
If you want to pay off your reverse mortgage early, you will not be penalized.
It’s okay if your home appreciates in value
That just gives you more money when the home sells and the reverse mortgage is paid off.
You’re covered if your home depreciates in value
If your home, when you sell it or move out of it, is worth less than the outstanding loan amount, the balance is covered by FHA mortgage insurance.