When the topic of home mortgages and finance comes up, it’s important to explore every available option. Every homeowner has the same goal, own their home free and clear and pay as little money as possible in the process. Understanding the numerous available financial options is not an easy task and usually involves a lot of questions that seemingly go unanswered.
Most recently, we’ve received several questions about a reverse mortgage vs regular mortgage (traditional) and the differences between them. Many inquirers have seen commercials for a reverse mortgage and think it’s too good to be true. Many outfits have misrepresented the reverse mortgage program and have tarnished the reputation of a helpful financial product. When talking about mortgages and financial products it’s important to keep in mind that what works for some may not work for others. It’s important to weigh out every option; understand that making the best option for your financial future starts with recognizing and accepting personal circumstances.
A traditional mortgage is typically used when qualified borrowers are trying to purchase or refinance a property. When people are looking at homes, it’s not very common that the potential homeowners have upwards of $100,000’s in cash saved up for their dream home. They’re going to need help paying off this big purchase. This is where mortgage lender’s come into action, they’re the ones who are willing to give you the money you need to buy the home but they’re not going to do it for free. The mortgage lender expects the potential homeowners to have a down payment (usually 20% of home value) and will charge the homeowner interest on top of the principal balance that the homeowners are borrowing against. The interest rate that the homeowners are paying is dependent on the type of loan they are taking out (15 year, 30 year) and can either be locked into the market’s current rates with a fixed option or is subject to change with an adjustable option. For homeowners who have lived in their home for some time and are paying a much higher interest rate than the current (to date) mortgage rates, refinancing may be a beneficial option. When refinancing a home, homeowners are doing so in attempts to lower the rate of interest they are paying and in turn save money on the overall price of the home. Refinancing the home might end up saving homeowners money in the long term scheme of things but also comes with an out of pocket cost which might not be beneficial if the change in rate doesn’t equate to substantial savings. To qualify for a traditional mortgage, borrowers must have adequate credit history and there is an income requirement so lender’s know you will be able to pay back the loan. Anyone who fits into these parameters can qualify for a traditional mortgage product.
A reverse mortgage however is a traditional mortgage, only backwards. A reverse mortgage is an FHA government insured loan designed for homeowners age 62 to help pay off any remaining mortgage balance on their property. Depending on how much equity the homeowners have invested in their home, they could also receive a payout that essentially acts as a form on nontaxable income. There are specific qualifications for the reverse mortgage program which include anyone on title being age 62 and above, the property in question must be their primary residence, and there must be equity already invested in the property. With a reverse mortgage, the loan closes in the homeowners names which means that they still own the home and are able to live in the property for the rest of their lives.
Essentially with a reverse mortgage, you are able to use the equity you’ve already invested in your home in the here and now rather than leaving it to your heirs after your demise. It is beneficial for homeowners who need the financial help and have very little desire to leave their home to their heirs. In speaking to various people who took out a reverse mortgage, many said that their children or heirs admitted to being taken care of financially and said that selling their parents or family members home would be a burden to their present lives. Now this doesn’t mean that the reverse mortgage lender automatically just gets the home after the last remaining title holder passes away. The family does have a choice in what happens next. The family has up to 6 months to either pay back the reverse mortgage loan in full, qualify for the mortgage and start making monthly mortgage payments, or can sell the home and walk away with the difference after paying off the reverse mortgage loan.
When it comes to a reverse mortgage vs regular mortgage, there are a lot of factors that contribute to making such a big financial decision. Do your research and get as much information as possible to address any questions or concerns you may have. Reverse Mortgage Space can help you understand the in’s and out’s of the reverse mortgage program and get you in contact with the nation’s leading reverse mortgage lenders. With some of the most competitive rates around, don’t you want to make sure you’re making the best decision for your future? Call Reverse Mortgage Space today and find out if you qualify!