You bought your Tucson home years ago. Thankfully, you managed to either pay it off or now hold a considerable amount of equity in it. Now, you're considering retirement. That may mean that you are looking at a fixed income soon. One of the ways to tap into your equity without selling your home may be through a reverse mortgage.
Reverse Mortgage Explained
What Is It?
First of all, a reverse mortgage allows homeowners aged 62+ to access part of their home's equity with a loan. How does this differ from a HELOC or home equity loan? Well, instead of making monthly payments to a mortgage company, the bank pays you a monthly stipend. Plus, the loan does not require payment until after the last legal homeowner dies or moves out of the home permanently. And you may still qualify even if you still owe a balance on your mortgage loan.
Who Qualifies for One?
Homeowners must be at least 62 years old and use the home as their permanent residence to qualify. You must either own your home outright (meaning no balance due on your mortgage loan) or you must have a low balance. If you still owe money on your mortgage loan, you must use part of your funds from the reverse mortgage to pay it off. You cannot owe anything for outstanding income taxes or student loans. Your property must be in good condition. And you need to meet certain financial requirements through HUD.
Pros
On the positive side, a reverse mortgage gives you money right now. Also, you get this money without going through the hassle of selling your Tucson home and moving. Moreover, this money usually goes into your pocket tax-free. Furthermore, as I stated before, the loan does not come due until you move out of your home.
Cons
Unfortunately, these also come with a few negatives. For example, it costs more than a traditional mortgage. How? In higher interest rates and higher loan fees. Once you move out, the loan comes due. That means that you must provide proof each year in writing that the property is your permanent home. Otherwise, you may find yourself forced into foreclosure. Finally, if you decide to leave your property to your heirs, it could force them to sell the house relatively quickly in order to pay off the mortgage.
Before you decide whether or not this is a good option for you, consider all of the pros and cons. Talk to a reputable lender. Ask them any questions that you may have. Make sure you understand every aspect of a reverse mortgage before you start the process.
Rebecca Schulte, Schulte Real Estate Group, Your Source for Tucson Real Estate
