Everything You Need to Know about a Reverse Mortgage but Were Too Afraid to Ask

There's nothing quite like the feeling of owning your own home. It’s an investment you don’t take lightly. From the purchase of your first home to moving on to what will be your family home, you’re not just placing a roof over your head and the heads of your family, you are creating memories.

But not everyone can afford to pay the monthly mortgage once they turn 62 and the retirement years loom large. After all, you will no longer be earning a paycheck but instead living off your savings and/or a 401(K) retirement plan. 

But what can you do if you find yourself in the position of having to choose between paying unexpected expenses like medical care or home repair/renovations, and paying the monthly mortgage payment?

One financially smart place to seek help is by applying for a reverse mortgage loan. While there are different reverse mortgage pros and cons, generally speaking, a reverse mortgage can save you a whole lot of financial and emotional heartache.

According to a new article, reverse mortgages are a way for homeowners 62 years of age and older to leverage the equity in their home in the form of monthly payments or one lump sum payment. 

With a reverse mortgage, a homeowner who has considerable equity built up in their home (or who owns their family home outright), can withdraw much of this equity in the form of cash and never have to pay another mortgage payment again. 

What’s more, they never have to pay the loan back until they either move or the borrower passes away.

The Home Equity Conversion Mortgage (HECM) is, at present, considered the most popular form of reverse mortgage since it is back by the federal government.

How a Reverse Mortgage Works

Regardless of what the reverse mortgage offers, some qualified homeowners might not be in the position to borrow the entire value of their home even if they paid the mortgage off long ago. 

The homeowner can only borrow the “principal limit.” This value is calculated based on the age of the youngest borrower and/or eligible non-borrowing spouse. 

It also takes into consideration, current interest rates, the home’s present value, and the HECM mortgage limit which in 2021 is $822,275.

The older a homeowner is, the higher principal limit they are likely to receive. Accordingly, the more the home is worth and the lower the interest rate, the more cash they will receive also. If the homeowner chooses a variable rate, the amount of cash could increase.

Variable rate options include the following:

--So long as at least one of the borrowers lives in the home, the borrower can receive equal monthly payments.

--These equal monthly payments are for a pre-selected or fixed amount of time agreed upon when signing the reverse mortgage paperwork.

--A line of credit.

--A combination of fixed monthly payments and a line of credit for the duration of your stay in the home.

However, if you’d rather go with a HECM that’s backed by a fixed interest rate, you are eligible to receive a single lump-sum payment. Keep in mind, the homeowner still needs to come up with the cash to maintain the home and make necessary repairs.

The Home’s Rightful Owner

If you’re wondering who owns the home once you qualify for a reverse mortgage, you own the own. But when the borrower moves or passes away, the mortgage must be paid in full. 

If it’s impossible to pay the mortgage, the lender retains the right to sell the home in order to recoup their money.

Reverse Mortgage Uses

A reverse mortgage can be used for a variety of necessities that are normally associated with aging homeowners. For instance, the funds can be used for supplementing retirement income. 

It can also be used for covering the costs associated with expensive home maintenance or repairs such as a roof or boiler replacement. Some folks need the extra money for paying mounting out-of-pocket medical expenses.

Reverse mortgages are the perfect solution for covering hefty expenses that would otherwise need to be covered by high-interest credit cards and/or lines of credit.

Requirement for a Reverse Mortgage

The first requirement for qualifying for a reverse mortgage is the primary homeowner must be at least 62 years old. He or she must have paid of most of the mortgage, or all of it. The home must be listed as your primary address and you cannot be behind on payments associated with any other federal loans.

You must also have enough funds available to pay your homeowners insurance and your property taxes. You will also be expected to actively participate in an information session that’s provided by an approved reverse mortgage counselor from the U.S. Department of Housing and Urban Development (HUD).

3 Reasons to Get a Home Loan

When it comes time to buy a house, most buyers will have to resort to a home loan. Although it may be tempting to save up and pay for a house in cash, getting a traditional mortgage is a better option for the overwhelming majority of consumers.

Here are three reasons you should consider getting a home loan when you buy real estate.

You'll Be Able to Buy Much Sooner

The most obvious advantage of a home loan is that it will allow you to buy and move into your new house much sooner. For all but the highest income earners, saving to pay for a house in cash can take years or even decades.

During that time, you'll have to continue paying rent that could otherwise be spent making payments on a home of your own. In almost all circumstances, the ability to buy quickly and begin building equity in your own property makes a home loan a much better solution than saving to pay for a house out of pocket.

Your Money Can Work Harder

Even if you have enough saved to buy a house without a mortgage, there's still a fairly strong argument in favor of home loans. Mortgage rates, particularly these days, are very low.

When compared to the historical average of the stock market, you'll actually come out ahead by investing your money while paying a much lower rate of interest on your mortgage.

While it may seem counterintuitive, your money will actually work harder when you invest it than when you save it to put toward a home.

Home Loans Provide Protection Against Inflation

As recent experience has proven, high inflation can quickly eat away at your savings. This can be a serious problem when you're saving toward a purchase as large as a house.

When you take out a loan, though, your payments are determined at the outset. This means that even during periods of higher inflation, you can predict what you'll have to spend and not have to worry about your payments rising.

It should be noted, though, that it only applies to fixed-rate loans. If you take on a home loan with a variable interest rate, you could see your payments increase if interest rates rise.

As you can see, there are many good reasons to finance your home purchase with a loan. While there are exceptions to every financial rule, the vast majority of home buyers are better off using home loans than trying to save and pay for their new homes out of pocket.

4 Benefits of Refinancing Your Home Mortgage

You've probably heard of the word "mortgage," and you know what it means: a financial instrument that lenders, like banks and credit unions, use to make home loans. 

But did you know that your mortgage can benefit you in ways other than making debt payments? Below are the benefits of refinancing your home mortgage.

Convenience and Increase Home Equity

Many lenders offer refinancing home mortgage options. It's really up to you, but once you have decided on a lender, getting prequalified before visiting the lender is the easiest way to ensure that you are getting what you want. 

Many banks have pre-qualification tools on their websites. Just enter your information, and you get an idea about what you can borrow. 

Other terms of the refinance may include an increase in the value of your home, so you can borrow against this equity to take care of other debts. This is known as a cash-out refinance, and you can use it to pay off consumer debt or even finance home improvements.

Lower Interest Rates

The first thing that homeowners consider when refinancing or selling their homes is how much they can save in interest payments. For example, if you pay 5 percent interest on your current loan, you can refinance a new loan with a lower rate. 

Even if the new rate is higher, the savings will be greater. Moreover, the lower payments will leave you with more to save for retirement or other expenses.

Turn Investment Property Into Owner-Occupied Property

If you own an investment property that you want to turn into an owner-occupied property, refinancing a home mortgage may allow you to switch from an investment mortgage to a conventional mortgage. 

This will allow you to sell the investment property and make a profit. If the new mortgage is an FHA loan, you can still keep your investment property and rent it out.

Lower Your Mortgage Payment

You probably pay more than the amount on your mortgage each month. You might also regularly make extra payments on interest or principal, such as when you first move into the home or take out a 30-year mortgage. 

If you decide to refinance, your new lender may agree to lower principal payments to pay off any outstanding balance. This is known as a principal-reduction refinance.

Refinancing your mortgage is a good way to save money on interest, get a lower payment, or even sell your home with little to no down payment. 

It's also a good option if you need money to pay off debts or make home improvements. You can use the money from a cash-out refinance to make some of these improvements.

4 Investment Tips for Staying Financially Stable

We've all heard the fact that investments are a necessary part of developing a portfolio of wealth that can be passed on for generations. 

Unfortunately, there is an abundance of both good and bad investment ideas out there that can make it difficult to determine what you should do. 

We're going to share four investment tips that you should follow whenever you're thinking about investing your own money.

Invest Only in What You Can Lose

Investments are not meant to be a get-rich-quick scheme in many cases. Rather, they're a way to try and generate wealth over a lengthy period of time. It's best to stick to only investing with funds that you can afford to lose. 

You don't want to invest your entire paycheck in hopes that you'll get the money that you need back. Investing the money that you can't afford to lose is a surefire way to ruin your financial stability.

Diversify Your Investments

As you start to learn about a specific type of investment plan, like Buying and Selling Regulation CF Shares, it can be easy to want to stick to doing that one investment type. 

Humans tend to converge towards completing investments that they have an abundance of knowledge in. However, there's always the possibility that an event could come along that completely wipes out all investments of that specific type. 

For this reason, it's best to diversify your investments over different mediums. This works to reduce your risk of completely going bust on your investments.

Invest in What You Know

When you opt for investing in anything, you should know about it. Never invest in anything that you aren't familiar with, as it could lead to trouble. 

If you hear about a good investment, always check in with a professional to ensure that it's actually in your best interest if you don't understand it.

Never Go Into Debt for Investing

While it may be tempting to pull out a personal loan for a surefire investment idea that you've heard about, you should avoid doing so. You never want to take on debt to have the available funds to invest. Rather, you only want to use money that you've already earned to invest.

Investing can be a great way to build up your wealth going into the future. However, the above are some key investing rules that you'll want to follow. These will help to ensure that you stay financially stable throughout your investing career.

Home Repairs That Will Give You a High Return on Investment

Do you want to make your home more valuable? If so, then it is worth looking into some of the different things you can do on the inside and outside of your home to increase its value. 

Some projects might not be as expensive as you think but will provide a high return on investment. This article talks about some common home repairs that are likely to give you a high ROI!

Vinyl Window Replacement

Everyday wear and tear can take a toll on your home, including the windows. If you have old drafty windows in your house, then you might consider replacing them with new energy-efficient ones that will save you money over time. 

Vinyl window replacement is relatively inexpensive, but it can increase the value of your home by up to 80%. This is because vinyl windows are cost-effective, energy-efficient, and low maintenance.

Kitchen Remodelling

Kitchens are another thing that potential buyers want to look at when purchasing a home. If you are thinking about selling your house, then consider looking into kitchen remodeling. 

This can include anything from minor cosmetic updates to more extensive renovations that will give you a brand new look. It has been estimated that kitchen remodels projects can increase the value of your home by up to 90%.

Having New Siding Installed

The siding on your house is another thing that people consider whether to buy your home. If your siding is old, chipped, or just unattractive, then it might be time to have it replaced with new siding to increase the value of your home. 

Homeowners should remember that not all siding is created equal, so it is important to make sure that you choose the right one for your home. It has been estimated that siding replacement projects increase the value of your home by up to 80%.

Wood Deck Addition

If you are looking for something that is fun to do at home but can also increase the value of your house, then consider adding a deck. 

Decks are trendy additions to homes because they are aesthetically pleasing and can entertain guests or just relax outside on cool summer days. It has been estimated that wood deck addition projects can increase the value of your home by up to 75%.

Porch Replacement

If you are thinking about selling your home and buyers don't like what they see when they visit, consider looking into porch replacement. 

The front porch area of a house is important because it sets the tone for everything else about the exterior of your house. Many people look at the porch when they are trying to determine whether or not they want to buy a home, so you must stay ahead of the game and keep your home in good shape. 

It has been estimated that porch replacement projects can increase the value of your home by up to 70%.

Roof Replacement

Your roof will likely need to be replaced about every 20 years. If you fail to replace your roof when it is due for an upgrade, you can decrease the value of your home. To make sure you are keeping your home in excellent condition, get a roof replacement when needed. You can upgrade to other roofing materials to add even more value as well.

As you can see, there are several things that you can do to increase the value of your home when it comes time to sell. You will have to decide which project is right for you based on your financial situation, but these projects are typically inexpensive but have a high ROI.

Signs Your Aging Loved One Would Benefit From Assisted Living

If you have a parent or another beloved family member who’s aging, they may need additional help to manage everyday life. Facilities that provide living assistance can help elderly residents perform many daily tasks and help keep them safe while giving each person enough freedom to feel more independent. 

If your loved one is showing any of these signs, the two of you should discuss the benefits of living assistance to determine if this option is right for them.

Frequent Accidents

Accidents that happen often can put your loved one’s health and safety in jeopardy. Falls, lacerations, and head injuries can afflict your loved one if frequent accidents occur. 

A facility that provides assistance with everyday living can monitor your aging family member better to decrease their chances of getting hurt in accidents.

Forgetfulness

Everyone forgets things from time to time, and elderly people are often more prone to memory challenges. However, if your loved one is forgetting things often and is having a lot of trouble functioning in everyday life because of it, you should consider moving them into an assisted living facility. 

Your loved one’s memory difficulties may be especially concerning if they forget to take important medications frequently. Your loved one may also need living assistance if they often get lost when they leave the home.

Cleanliness Problems

If your loved one’s personal hygiene and home cleanliness aren’t up to standard, it might be time to move them into a facility that provides living assistance. 

Neglecting to bathe or clean the home regularly can lead to a variety of health problems that may be especially harmful to elderly people who have weaker immune systems. 

The best facilities that help the elderly always ensure that each person receives the proper bathing and housekeeping for maximum cleanliness.

Mental Health Decline

The elderly are often especially vulnerable to depression, anxiety, and other mental health problems. These mental health struggles may cause your loved one to become more withdrawn and less interested in life. 

Professionals who work at facilities that provide living assistance can monitor your loved one’s mental health better and encourage them to engage in social activities that can help combat many mental health challenges. 

The facility will also make sure that your loved one is taking any prescribed medications that may be needed to treat symptoms that are associated with certain mental health conditions.

Your loved one shouldn’t have to live life alone as they age. If any of these problems are standing in the way of a safe and happy life for your loved one, a facility that assists with everyday living may be the answer.