Certified Reverse Mortgage Professionals, Chris Handy and Louis Baca, discuss how refinancing or purchasing a home with a reverse mortgage allows for self-directed mortgage payment forbearance. If you would like to learn more about Reno reverse mortgages, watch this video and others like it here.
Mortgage Forbearance for Senior Homeowners
As home values increasingly go up and interest rates remain low, more people have more equity. While mortgage forbearance lets you postpone your monthly mortgage payments, it should be something to avoid if possible. However, as a last resort for a lot of people who are struggling with their mortgage payments, there is an option available to create your own mortgage forbearance option.
Reverse Mortgage Requirements
Let’s say you are a 62 year old who owes $300,000 on a $400,000 house. You take $100,000 out of your 401k and put it towards your mortgage, which puts you at 50% equity balance. If the balance is paid down enough for you to qualify, then you can refinance into a reverse home mortgage—and your mortgage payment essentially becomes optional.
Reverse Mortgage Solutions
In your 60s, it makes sense to keep paying your mortgage because it builds up your credit line. Then, in 10-15 years, you’ll have $100,000-$200,000 (depending on what you pay) in your credit line. However, it’s important to be aware of the fact that the bank can suspend your payments since they were based on your payback schedule (and not the banks).
Strategies to Pay or Not Pay
Some folks don’t pay or do a reverse mortgage until 70 so they can maximize their social security benefit. Others do want to pay. For example, someone may want to pay the loan balance down. However, they are building a credit line that they can tap into later on when they don’t have as much income.
The Risks of a Reverse Home Mortgage
While home equity lines have the potential get cut, you’ll see a lot of credit lines were also cut during the last recession.
Homeowners who wanted to wait and set up a line of credit on their house are now coming back because of the uncertainty of the market. Additionally, the minimum payment on lines of credit get higher and higher because they’re not necessarily generating extra income. Essentially, they’re taking money off the credit line to pay back the credit line, which becomes a cycle of watching your balance go up and watching your minimum payment go up. Meanwhile, at any time, the bank can shut off that home equity line of credit, so it’s a risky move to rely on the line being open to pay back the bank.
There is nothing stopping a bank from saying they will cut back on the risk to their portfolio/stop people from drawing additional money on their credit lines. This makes it very risky for someone who was completely relying on the credit line being open just to pay the money back to it.
When it comes to a forward loan, if you don’t have a job and your social security income can’t cover the mortgage payment, the ratios of how much income you have now vs. what is required to repay isn’t going to be ideal. So, a reverse mortgage is a safe alternative that gives you control of your finances.
Certified Reverse Mortgage Professional
If you are considering getting a Reno reverse mortgage, it is important to know your options. Certified Reverse Mortgage Professional, Chris Handy, will help you find the ideal situation to increase your monthly income and provide you the security you deserve. With 20 years of experience in the industry, Chris is licensed in the following states: Arizona, California, Florida, Georgia, Idaho, Missouri, Montana, Oregon, South Carolina, Tennessee, Texas, and Washington. He will analyze the current housing landscape and determine your eligibility amounts for a reverse mortgage—and make sure it makes sense to you. For more information or to schedule a consultation, contact Chris Handy today.