These days, it’s common for homeowners to ask whether it is possible to use a reverse mortgage as an option when they have recently purchased or have accrued a lot of value in their house. We, as mortgage brokers, frequently get asked this question by clients evaluating their financing choices.
Yes, it is possible to use your home’s equity for a reverse mortgage regardless of when you got that value, either through years of ownership or just making a down payment. With the right South Carolina mortgage lender, you can achieve your financial goals, and BrickWood Mortgage can help you make these decisions!
What Are Reverse Mortgages?
In a reverse mortgage, people above 62 years get an opportunity to withdraw cash from their home’s equity without selling their homes. In a normal mortgage, you pay installments to the lender monthly. In a reverse mortgage, you receive money. Repayments are required when you sell your house, move out of your house permanently, or when you pass away.
We also take pains to explain to our clients that reverse mortgages work as a kind of financing option that allows you to tap your wealth, which is locked in your property. You will be eligible to get a loan based on several criteria, including your present age and rate of interest, but most importantly, your home’s value. Many people wonder, can you buy a house with a reverse mortgage? This is a popular question that we encounter and are happy to explain during consultations.
Understanding Home Equity
Home equity is calculated as follows: your property value minus your mortgage amount. Example: If your property is worth $400,000, and you owe a mortgage of $150,000, you have a home equity of $250,000.
Equity can actually be generated in two ways: through appreciation, as market value rises, or through making mortgage payments that decrease the amount owed in your mortgage. Equity can also immediately be created when purchasing your home with a large down payment.
Use of Equity of Any Kind in Reverse Mortgages
On a positive note, as a homeowner, you will be glad to know that reverse mortgage lenders do not care about your sources of equity. Be it that you have owned your property for several years, thus creating equity from your mortgage payments and appreciation in value, or you purchased your property recently with a substantial down payment, it is all good.
We have dealt with clients in all kinds of situations. Some of our clients are lifetime homeowners who have fully paid off their mortgages and actually own their property outright. Others are new buyers, having sold off their large houses and gaining enough down payments for a smaller one. In either case, they are in a position to tap the value of their property through reverse mortgages.
An important aspect of a reverse mortgage is that you need to have enough equity in your home. Most reverse mortgage plans will require you to own at least 50-60% of your home’s value, although this depends on your age as well as the type of loan that you have.
Advantages of Reverse Mortgages
Reverse mortgages have several benefits for qualified homeowners. Reverse mortgages offer tax-free funds that will assist in supplementing retirement income, meeting healthcare costs, or financing home renovations. Another major advantage of reverse mortgages is that they do not need monthly payments, as is common with a normal or traditional loan.
Moreover, reverse mortgages are considered non-recourse loans, so you or your successors will never have to pay back more than the value of your property when it is time to repay that loan.
Another aspect of reverse mortgages that attracts a lot of clients is their flexibility. You get money in a lump sum, through monthly payments, through a line of credit, or a combination of all of them. Some clients explore the opportunities available for buying a house with a reverse mortgage as part of their long-term financial strategy.
Making the Right Decision for Your Financial Future
In either instance, whether it’s a reverse mortgage in a home you’ve owned for a while or one you recently bought, your equity that you’ve developed or obtained is an asset that works for you. This is where mortgage brokers such as ourselves come in – to have your situation evaluated by a team of experts at BrickWood Mortgage and determine if a reverse mortgage is a part of your strategy.
Keep in mind that reverse mortgages are not an option for all, but for those meeting specific qualifications and having a lot of home equity, they prove to be a great means of securing economic flexibility in one’s elder years!
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This material is not from HUD or FHA and has not been approved by HUD or any government agency.