With Guest Blogger Steven Bland, Alcova Mortgage
If you’re looking at ways to pay for senior housing options now or in the future, you may have heard about a reverse mortgage. Reverse mortgage proceeds are frequently used to pay for senior living needs such as home care, assisted living / nursing home care, modifications to the home to allow aging in place, and even to buy long term care insurance. A very general rule of thumb is that seniors can borrow a maximum of approximately 70% of their home’s value.
What is a reverse mortgage? A reverse mortgage is a loan program for homeowners 62 and older allowing access to a portion of the equity in their primary residence without ever having a monthly payment.”
How does it work? First, any liens (mortgages, etc.) associated with property must be satisfied with the reverse mortgage proceeds. The borrower will have access to the remaining funds through a lump sum payment option, monthly payment program or line of credit….or all three.
How does it benefit me? A reverse mortgage can benefit the borrower in many ways…paying off an existing mortgage or other debt, a borrower can supplement their income, or a borrower can establish a line of credit for future use. Overall, the borrower can remain in their home and reduce monthly obligation by using the equity in their home.
What fees are associated with a reverse mortgage? HUD (United States Department of Housing and Urban Development) has an established formula for determining the fees. In summary, there is an origination fee, up front mortgage insurance fee (2% of appraised value) and standard closing costs. On an annual basis, there is ½ of 1% mortgage insurance premium.
If you’re looking into a reverse mortgage to help finance long term care, be sure to contact someone who specializes them like Steven, to make sure you’re getting the right product for your needs.