Seniors Use Reverse Mortgage As Cash Lifeline Amid the Coronavirus Outbreak

The global economy is taking a beating from the coronavirus outbreak and investment portfolios are also taking a hit. Although all these bring unpleasant news to investors, the most affected ones are retirees who rely on their investments for income. And when these significant drops happen at the start of their retirement, they could lock in a lower nest, also referred to as sequence of return risk, permanently.

Financial planners suggest to leave the money even when the market is down. But this recommendation isn’t applicable for everybody. One approach that some financial advisors suggest to their clients is to take out reverse mortgages.

During the past few weeks, reverse mortgage applications have gone up. Applications for HECM or home equity conversion mortgage, which is the most usual kind of reverse mortgage that is backed up by the FHA orFederal Housing Administration, have gone up by 15% back in March. During the first quarter, applications increased by 50% compared to the same period in 2019.

Some financial planners said that a reverse mortgage could be another source of money. Compared to traditional loans, a reverse mortgage lets older homeowners to get access to the equity of their home, without the need for repayments as long as they remain in the house. The borrower should be at least 62 years old in order to qualify for a reverse mortgage.

There are three factors that would determine the amount that you can borrow. These include the age of the younger borrower, the appraised value of your home, and the current interest rates. The maximum loan amount that you can take out is 765,600, even if your home’s value is greater than that. Borrowers with a current mortgage in their house should use a portion of the reverse mortgage loan to pay that home loan first.

The interest rates on the reverse mortgage are adjustable. However, they are quite similar to conventional mortgages along with a 0.5% of the outstanding balance for the mortgage insurance premium. The HUD said that the adjustable HECM rates were at 4.01% back in March.

But you need to know that there are some catches with reverse mortgages especially since this type of loan can be quite complicated.

If you wish to keep the reverse mortgage loan in place, you have to continue maintaining your hours, pay the property taxes and property insurance. If you fail to do this things regularly, you may have to face foreclosure.

Another thing is the interest rate. The interest rate will accumulate throughout the life of the reverse mortgage loan. This means your loan balance will get bigger and could even go beyond the value of the house. Anybody who wishes to leave their house to their kids will not be able to proceed as they planned.

Reverse mortgage is referred to as a non-recourse loan. There something you can do when it comes to what your debt could lead to. Therefore, even if your mortgage remains underwater. What you’ll owe will only be the value of your house. Then, the insurance premium will protect the lender from loaning out much more the home’s value.

Call Reverse Mortgage Specialist for more information about reverse mortgage loan.

Reverse Mortgage Specialist
Charleston, SC 29401
843-353-6071
http://reversemortgagecharlestonsc.com/