How A Reverse Mortgage Works
A reverse mortgage is a loan. You are not selling your home, the bank is not taking it away, and your home will still be under your name. Unfortunately, just like any other loan, you are still responsible for paying taxes and insurance. What is unique about a reverse mortgage is that you are not required to make regular payments as long as you live in the home and it is your primary residence. It’s called a “reverse mortgage” because it operates the opposite of a traditional loan. You don’t make monthly payments and the balance of your mortgage rises. While payments are not required, borrowers can make payments whenever they want, for however much they want.
Reverse mortgages are an option for those over the age of 62. Seniors often choose to take out a reverse mortgage if they are needing to pay off debt. The cash flow drawn from your home’s equity can be used to pay off medical bills, caregiver costs, retirement expenses, and home remodeling repairs, to name a few of the most common uses.
How A Reverse Mortgage Can Be Paid Off Early
The process of paying off a reverse mortgage is not too complicated, however, it is important that you stay on track and create a plan that will work for you. We advise contacting one of our reverse mortgage specialists at Idaho Reverse Mortgage. We will sit down with you, discuss options, and make sure any issues are avoided. To make it easier on you, we came up with a few steps on how you can pay off your reverse mortgage early:
Step 1: Come up with a specific date when you will have your mortgage paid off. Remember that a reverse mortgage is a loan. Just because you are no longer having to pay a monthly mortgage, it does not mean it has gone away forever. Although reverse mortgages do give you a break to make sure other debts are paid off, paying your mortgage off should still be in the back of your mind. Talking to a professional and coming up with a respective date can help you develop goals and make this process easier.
Step 2: Your reverse mortgage plan may include paying interest. Whether your plan requires you to pay interest or not, it is highly recommended that you pay it once every month. For example, you have a reverse mortgage for $100,000. When you decide to make interest payments each month, you prevent the balance from increasing. This interest payment will be less than your mortgage payment, but double-check to make sure this will work with your particular financial situation.
Step 3: If you had prepaid insurance for the entire year and you plan on selling the home, you might be able to claim reimbursement. Make sure you inform whoever is helping you with your reverse mortgage what day you plan on paying it off so you can get your reimbursement without complications.
Changing Your Current Plan
There are several different kinds of payment plans available if you’re looking to get a reverse mortgage. You can opt to get a large sum upfront all at once, you can receive monthly payments, or pick a combination of both. The plan you choose will affect how much money you receive in the short and long run, how quickly you use up your home’s equity, and how effectively your reverse mortgage will assist your financial goals. It’s important to know that if your financial goals change, you can always switch your current payment plan, unless you’re on the fixed rate or one-time lump sum. Changing plans will only cost a small administrative fee and can help you pay off your reverse mortgage early. Paying off your reverse mortgage and living a debt free life truly makes things a lot simpler. Paying off debt is a freeing and invigorating experience that will help you develop a financial peace of mind.
If you are considering a reverse mortgage, give us a call at Idaho Reverse Mortgage. Getting a reverse mortgage is a big decision and we want you to have all the necessary information to help decide what is right for you and your family. Our reverse mortgage counselors can help answer any questions you may have, weigh your options, and understand what choices best fit you for both the short and long term!
