Latest news with #HomeEquityConversionMortgages
Yahoo
03-04-2025
- Business
- Yahoo
What are the pros and cons of a reverse mortgage?
As a homeowner, there are lots of ways to access your home equity. You can take out a home equity loan or HELOC, apply for a cash-out refinance, or — if you're a senior — get a reverse mortgage. Reverse mortgages are a unique option because they require no monthly payments. Instead, you receive payments from the reverse mortgage lender. This can make them an innovative tool for retirees needing extra cash or those looking to cut monthly costs when income is limited. Still, reverse mortgages aren't the right move for everyone, and they have some pretty steep risks. Here are the pros and cons you'll want to consider before taking out a reverse mortgage. In this article: What's a reverse mortgage? Reverse mortgage pros Reverse mortgage cons FAQs A reverse mortgage is a type of loan that lets you borrow from your home equity — only in 'reverse.' Instead of borrowing the cash and paying it back with monthly payments over many years, the balance (plus interest) only gets repaid when you move out of the home, sell the house, or pass away. In the meantime, the lender pays you — either through a regular monthly payment, a single lump sum, or a line of credit that lets you withdraw money as needed. Only older homeowners are eligible for reverse mortgages. For Home Equity Conversion Mortgages (HECMs) — the most common type of reverse mortgage insured by the Federal Housing Administration (FHA) — you must be at least 62. Some lenders offer proprietary reverse mortgages, allowing borrowers as young as 55 to qualify. Reverse mortgages offer several benefits for older homeowners. For one, they can provide much-needed income at a time when earnings may be scarce. Even better? That money isn't taxable. (The IRS considers it loan proceeds, not taxable income.) They also allow you to age in place while eliminating your monthly housing payment, which can help you stretch your retirement dollars even further. And as long as you use a HECM, you'll never owe more than your home is worth. That means if your home loses value over the years, you'll only owe the lender up to its fair market value — nothing more, regardless of how much you borrowed. While reverse mortgages have advantages, they also come with some significant risks. First, just like other home loans, they are secured loans that use your home as collateral. So, if you fail to comply with the terms of your loan (such as staying current on property taxes, home insurance, and maintenance), you could lose your house to foreclosure. This type of loan may also affect what you leave behind for your heirs. It can deplete your equity and task your loved ones with paying off your reverse mortgage loan balance — either through selling the home or out of pocket. Reverse mortgages have up-front costs too. These include origination fees, charges for third-party service providers, mortgage insurance premiums, and other closing costs. If you don't want to pay closing costs up front, you can request to have the expenses taken out of your loan proceeds. Unlike traditional mortgages, reverse mortgages won't qualify you for the mortgage interest tax deduction until you repay the loan. (Even though interest accumulates, you aren't making interest payments to the lender, so you can't deduct it on your tax returns.) If you don't spend all the funds each month, they can also hinder your ability to qualify for Medicare or even Social Security benefits. Speak with a financial advisor about these potential issues before taking out a reverse mortgage. There are many potential drawbacks to reverse mortgages. They put your home at risk of foreclosure, come with closing costs, and impact what you leave behind for your heirs. They can also affect your eligibility for benefit programs such as Social Security or Medicare. Suze Orman discussed reverse mortgage loans on a 2021 episode of her podcast, Women & Money. She suggested that selling a home may be a better option for seniors needing cash — particularly those needing to use the proceeds to pay off an existing mortgage. Many consumers worry about losing their house when taking out a reverse mortgage, as well as its ability to quickly deplete their home equity, leaving little behind for any beneficiaries. In some cases, reverse mortgages can also impact Medicare and Social Security benefits. This article was edited by Laura Grace Tarpley.
Yahoo
27-03-2025
- Business
- Yahoo
How and when do you pay back a reverse mortgage?
A reverse mortgage is a type of home loan for older homeowners who have significant equity in their property. Rather than making monthly mortgage payments to a lender every month to pay down your balance, the reverse mortgage lender sends you payments as you tap your home's equity. It can be a good source of income during retirement years. However, like any loan, this unique type of mortgage must be repaid eventually. So, how do you pay back a reverse mortgage? In this article: How reverse mortgage work When do you need to repay a reverse mortgage? Why you may want to pay off a reverse mortgage early How do you repay a reverse mortgage early? FAQs A reverse mortgage allows homeowners to use their home equity for income while remaining in their houses. Rather than homeowners making payments toward the mortgage principal and interest to a lender, a reverse mortgage lender provides the borrowers with a lump sum, regular monthly payments, or a combination. The income accrues interest that must be repaid under several circumstances — most commonly when the homeowners sell their house or pass away. The principal, interest, and fees accumulate monthly, meaning the total balance owed increases, and the home's equity is reduced over the loan term. This is the opposite of traditional mortgages: you gain home equity as the balance gradually decreases. Reverse mortgages, most of which are Home Equity Conversion Mortgages (HECMs) through the Federal Housing Administration, are available to homeowners aged 62 and older for their primary residence, depending on how much equity they have in the home. The homeowners must keep paying their property taxes and homeowners insurance and keep the house in good condition when they have a reverse mortgage. Your lender may require you to pay back your reverse mortgage when one of several scenarios occur, including the following: You move, and the home is no longer your primary residence. You don't pay your homeowners insurance or property taxes. You don't keep the property in good condition. You sell the property. You are away for more than 12 months in a healthcare facility such as assisted living or a nursing home. You and any co-borrowers pass away. As with a traditional mortgage, you may have one or more co-borrowers on your reverse mortgage loan. In that case, the reverse mortgage does not have to be repaid until all the co-borrowers move out of the house or die. In addition, rules by the Department of Housing and Urban Development (HUD) allow an eligible non-borrowing spouse to remain in a house without repaying the HECM if they meet certain requirements, including: The borrower and non-borrowing spouse must be legally married and stay married until the borrowing spouse dies. (They must have been married when closing on the HECM — unless they were engaged but unable to get married due to their sexes before closing, as long as they got married later.) The non-borrowing spouse must be named a non-borrowing spouse in the reverse loan documents. The reverse mortgage cannot be in default unless it is related to the last borrower's death. The non-borrowing spouse lived in the property when the reverse mortgage loan was closed and continues to live in it as their primary residence. The non-borrowing spouse must obtain title to the property or a legal right to remain in the property, such as a court order, for the rest of their life within 90 days after the death of the last surviving borrower. A reverse mortgage must be paid off when the last surviving borrower or eligible non-borrowing spouse moves out of the residence or dies. While the above scenarios refer to times when a reverse mortgage must be repaid, you might also want to know how to pay off a reverse mortgage early. If you apply for a reverse mortgage and change your mind, you have the right of rescission. This means you can notify the lender in writing within three business days to cancel the reverse mortgage and have any fees you paid returned. In the longer term, there are several reasons you may want to pay off your reverse mortgage early, such as: You don't need the money anymore. You want to move but keep your house as an investment or a second home. You want to leave your house to your heirs without a mortgage to be repaid. The reverse mortgage funds are not enough to keep up with your property taxes and homeowners insurance, so you want to sell and move. You find the accumulating debt of the reverse mortgage stressful. There are multiple ways to repay a reverse mortgage early, depending on whether you want to keep your home or move. If you want to keep your home, your options may include: Making incremental payments to lower your balance Paying back the loan balance in a lump sum with cash from savings or investments Refinancing the reverse mortgage into a traditional mortgage if you qualify Borrowing funds with a home equity loan or home equity line of credit (HELOC) to pay off the reverse mortgage balance If you prefer to move, your options may include: Selling the house and using the proceeds to repay the reverse mortgage; if there are additional proceeds from the sale, you keep those funds. If you are struggling financially and unable to keep up with your property taxes and insurance, you may be in danger of losing your home to foreclosure — to avoid that process, ask your lender about a deed in lieu of foreclosure, which is faster and less costly than a foreclosure but still typically means you have to move. When you inherit a house with a HECM reverse mortgage, you have a few options for repaying the loan. If you want to keep the home, you can pay off the reverse mortgage with cash or take out a traditional loan to repay the reverse mortgage if you qualify. If you don't want to keep the house, you can sell it, repay the loan, and retain any remaining proceeds. If the property sells for less than the loan balance, you can still repay as little as 95% of its appraised value. Typically, you have 30 days to buy, sell, or turn the house over to the lender after you receive a due and payable notice from the reverse mortgage lender. However, you may be able to extend that to six months, depending on the company. Yes, there is no prepayment penalty for paying back a reverse mortgage early. If you receive a notice that you are in default on your reverse mortgage because you did not pay your property taxes or homeowners insurance, keep your home in good condition, or certify that you are living in the house as your permanent residence, you may be able to rectify the situation and keep your home. For example, you can submit your missed payments as a lump sum or contact the lender about required repairs. If you can't pay your taxes or insurance or repair your home, you are in danger of losing your house in foreclosure. If you no longer live in the house, you can sell it to pay off your reverse mortgage. When you or your heirs repay your reverse mortgage, you may not have to pay the difference between your home's appraised value and the mortgage balance. A HECM reverse mortgage includes insurance that covers the difference as long as you or your loved ones pay back at least 95% of the house's appraised value. Most reverse mortgages have a 'non-recourse' clause, which means that you or your heirs can't owe more than the value of your home. This article was edited by Laura Grace Tarpley.
Yahoo
26-03-2025
- Business
- Yahoo
HUD provides disaster aid, financial options as West Virginia rebuilds after storms
March 26 (UPI) -- West Virginia will receive federal disaster assistance as residents rebuild following last month's severe storms, flooding and landslides, the Department of Housing and Urban Development announced Tuesday. "As West Virginians rebuild their homes, neighborhoods and businesses following the severe storms, HUD continues to provide financial flexibility and disaster recovery resources," said HUD Secretary Scott Turner. "Supporting disaster response is a core and important part of our mission-minded approach to serving communities at HUD," Turner added. West Virginia suffered severe flooding across much of the state on Feb. 15. The storms killed several people, took out roads and power lines and flooded homes and businesses. Gov. Patrick Morrisey declared a State of Emergency in 10 counties as President Donald Trump announced a Major Disaster Declaration to unlock federal resources. Tuesday's federal disaster aid from HUD means residents can expect a 90-day moratorium on mortgage foreclosures and a 90-day extension for Home Equity Conversion Mortgages. HUD will also provide FHA insurance to disaster victims, which gives borrowers 100% financing including closing costs. The insurance makes financing available for both mortgage and home restoration. And HUD said it will put residents in touch with housing counseling agencies to determine the needs of those impacted by the natural disaster and the resources available to them. "Ensuring our communities have the resources they need to recover from disasters is a top priority," said Sen. Shelley Moore Capito, "I am grateful to HUD for delivering additional resources to West Virginians impacted by these storms, which will help in the rebuilding and strengthening of our communities for the future."
Miami Herald
26-03-2025
- Business
- Miami Herald
HUD provides disaster aid, financial options as West Virginia rebuilds after storms
March 26 (UPI) -- West Virginia will receive federal disaster assistance as residents rebuild following last month's severe storms, flooding and landslides, the Department of Housing and Urban Development announced Tuesday. "As West Virginians rebuild their homes, neighborhoods and businesses following the severe storms, HUD continues to provide financial flexibility and disaster recovery resources," said HUD Secretary Scott Turner. "Supporting disaster response is a core and important part of our mission-minded approach to serving communities at HUD," Turner added. West Virginia suffered severe flooding across much of the state on Feb. 15. The storms killed several people, took out roads and power lines and flooded homes and businesses. Gov. Patrick Morrisey declared a State of Emergency in 10 counties as President Donald Trumpannounced a Major Disaster Declaration to unlock federal resources. Tuesday's federal disaster aid from HUD means residents can expect a 90-day moratorium on mortgage foreclosures and a 90-day extension for Home Equity Conversion Mortgages. HUD will also provide FHA insurance to disaster victims, which gives borrowers 100% financing including closing costs. The insurance makes financing available for both mortgage and home restoration. And HUD said it will put residents in touch with housing counseling agencies to determine the needs of those impacted by the natural disaster and the resources available to them. "Ensuring our communities have the resources they need to recover from disasters is a top priority," said Sen. Shelley Moore Capito, "I am grateful to HUD for delivering additional resources to West Virginians impacted by these storms, which will help in the rebuilding and strengthening of our communities for the future." Copyright 2025 UPI News Corporation. All Rights Reserved.
