Is a reverse mortgage right for you?

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June 1, 2021

We recently wrote an article about how now is the right time to make a big gift for your loved ones because of the favorable state and federal property and gift taxes. The same can be true when considering reverse mortgages.

In the current Connecticut real estate market, property values ​​continue to rise. In addition, the scores are getting higher, which means that older people will now be able to get more funds from reverse mortgages. If you already have a reverse mortgage, you may want to consider refinancing your loan.

Reverse mortgages are still one of the most misunderstood tools for retirement and long-term planning. The reverse mortgage program is surrounded by many myths. You may have the following questions:

1. Will my property belong to the bank? NOT! You will still be the owner, subject to the mortgage.

2. Will there be high monthly payments? NOT! There are no monthly payments, only payments you are paying now, for example: property taxes, homeowner’s insurance, etc.

3. Will the bank receive my property and not my family if I die shortly after receiving the reverse mortgage? NOT! The bank will not receive unexpected income. The mortgage must be paid off and the balance will go to your family and / or property.

A reverse mortgage allows homeowners over the age of 62 to borrow money against their home. The homeowner receives a sum of money from the lender, which is highly dependent on the value of the house, the age of the borrower, and current interest rates. The loan does not need to be repaid until the last surviving homeowner dies, sells the house, or moves out. Homeowners can use reverse mortgage money to pay for improvements to their home so they can delay receiving Social Security or pay for home health care.

The most widely available reverse mortgage product is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). The national limit on the amount a homeowner can borrow is $ 822,375.

Seniors with more expensive homes have an increased opportunity to get larger reverse mortgages to raise money for retirement. When the previous housing market improved, giant reverse mortgages became popular.

High-end borrowers should look out for a giant reverse mortgage that does not impose any restrictions on the loan. Large reverse mortgages allow seniors to borrow millions of dollars. Qualified borrowers can borrow up to $ 4 million in credit.

Reverse mortgages are non-recourse loans; even if the home ends up being sold for less than the reverse mortgage, the seller never owes more than the value of the home. How much money seniors can claim depends on their age and home value; the older they are, the more they can claim.

John Luddy, senior vice president of reverse loans at Norcom Mortgage, noted that one of the most compelling reasons to use a reverse mortgage is to pay for home care to avoid visiting nursing homes. He also noted that by using a reverse mortgage to pay for home care, we hope you don’t have to pay your own retirement bills, which could jeopardize your own ability to pay for future medical needs.

A reverse mortgage may not be the right move for everyone. Talk to an Elder Law attorney about whether a reverse mortgage is right for you. A reverse mortgage can help you get through these difficult times.

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