This week on Sunday Money we’ve got a viewer question for our moneyman, Certified Financial Planner™ Paul Fain, from Jim: Don’t know if you have ever discussed this but what about your thoughts on a reverse mortgage? I’m not a fan and would never do it but someone that may be in financial difficulty might benefit?
PAUL, LET’S START WITH EXPLAINING WHAT A REVERSE MORTGAGE IS…
· A reverse mortgage is a type of home equity loan for homeowners 62 or older that doesn’t require monthly mortgage payments – instead the home’s equity is paid out to the homeowner.
· You can choose from receiving a fixed sum every month for the rest of your life or a period. Or, you can draw down on a line of credit. Or, a combination.
· The loan balance need not be repaid until the borrower dies, sells the home, or permanently moves out.
HOW MUCH CAN YOU TAKE OUT OF YOUR HOME EQUITY?
· It depends but typically, you can take up to 60 percent of your equity.
· Several factors determine the amount of money you can get, such as: age, value of home, interest rate.
· Fees and other closing costs can be high.
WHAT ARE THE BORROWERS OBLIGATIONS?
· Stay current on your property taxes.
· Pay to insure the home, as you would be obliged to do with any mortgage.
· Maintain the home in decent condition.
WHAT ABOUT INHERITANCE?
· Every month, the interest on the loan piles up. So a reverse mortgage can quickly whittle away the home equity your heirs stand to inherit from your estate.
· Discuss your reverse mortgage plans with your family.
· Reverse mortgages are often considered a last-resort source of income, but they have become a useful retirement planning tool for some homeowners.
FAST MARKET FACT: January 2019 Housing Data
· U.S. median listing price $289,300
· 7% year-over-year increase
· Homes sold in 87 days in January
· Shift in market advantage from Seller to Buyer (Price cuts. Time on market longer. Inventory increasing.)
QUESTION FOR OUR MONEYMAN?
Send them to Paul@assetplanningcorp.com!
You can also reach Paul by using the contact page on APC’s website.