Paying Off Mortgage and Retiring – 5 Reasons Why One Should Come Before the Other

Paying Off Mortgage Before RetirementBeing free of debt is a great way of enjoying your retirement years. Most people agree that paying off your mortgage before you retire is something that will give you peace of mind and more financial freedom. However, many people end up retiring before their mortgage is paid off, which might not be necessarily a bad thing. Like everything when it comes to mortgages, what is best for one home owner may not be the best for another. Essentially, paying off your mortgage before your retirement years is advantageous, but there are cases in which not paying it off is the better choice, especially if getting rid of your mortgage involves a large financial sacrifice (Read: Should You Rely on Home Equity When You Retire? Think Again!).

When is it better to Not Pay off Your Mortgage

Not having to worry about a large debt after retiring will most likely make your life much easier. Unfortunately, paying off a mortgage earlier is not always a good idea. With today’s interest rates, you are probably paying less than 5 percent on your mortgage loan, and more than 10 percent on your credit card balances. Mortgages are considered a good debt, which means that you should pay them off last, and worry more about other type of debt.

Unless you have large assets that you can use while retiring, you should think twice before paying off your mortgage. Your retirement accounts have more tax advantages, so you should put your money into those before paying off debt. An even worse idea is to pay off your mortgage using money from your retirement accounts. You will have to pay a large penalty for the withdrawal, and end up spending more than you would on your mortgage.

Also, if you are able to refinance your mortgage loan, you could be saving thousands of dollars. However, refinancing is expensive and you have to include closing costs in your calculations before deciding if refinancing will save you money, or you should keep paying the mortgage as before (Read: Do You Make These Mistakes? Don’t Kill Your Mortgage Refinance!).

Reasons to Pay Off Your Mortgage before Retiring

There are more reasons to pay off your mortgage before retiring than there are to not pay it off. To find out even more reasons click here. Taking the necessary steps to make sure that your retirement accounts are replenished is very important before deciding whether paying off your mortgage is worth it or not. Here are the reasons why getting rid of your mortgage should come before retiring.

  1. Peace of mind. After years of making large payments each month, you can finally say that you truly own your home. This is especially important after retiring, when your income probably won’t be as large as before, and the chances of generating additional income are thin. Finding a job, investing or starting a business in your retirement years is unlikely, so not having to worry about the risk of losing your home if something unforeseen happens, or about having to make a large payment each month, is a blessing. To learn more about the benefits see this.
  2. Savings in interest. Over the life of a mortgage loan, you will be paying tens or hundreds of thousands of dollars in interest, so paying it off as soon as possible means that you avoid paying all that interest. Even refinancing into a shorter loan will bring great savings, as long as you don’t spend a lot on the closing costs. Not only will you be mortgage free by the time you reach your retirement years, but you can also use the money that you saved for something that will make your retirement much more enjoyable.
  3. It allows you to focus on spending less. The process of paying off your mortgage allows you to focus on saving for retirement, as well. If you wouldn’t have a monthly mortgage payment, you might be tempted to use that money to make other large purchases, like an expensive car. Deciding to pay off your mortgage puts things into perspective and gives you a chance to focus on your future plans.
  4. Build equity. Paying off your mortgage means that, if you ever need money once you are retired, you can take out a loan against the equity in your home or sell the home and have access to all the equity in it. You can use the money to pay your medical bills, buy a condo, or even for traveling (Read: Home Equity Loan).
  5. Avoid higher interest rates if your rate is adjustable. Adjustable-rate mortgages can be either advantageous or disadvantageous, depending on how the interest rate fluctuates. If the interest rate keeps rising, then you might end up with a larger down payment during your retirement years, so paying your mortgage off makes sense.

Not paying off your mortgage before retiring makes sense in some cases, but not having to pay a large bill each month is more beneficial. Unless you have to dip into your savings and retirement accounts to pay off your mortgage, the peace of mind that not having a mortgage brings outweighs the pros of keeping your mortgage during your retirement years.

Stop Losing Home Equity!

Stop Losing Home Equity-150x150Losing home equity can and probably will result in a series of serious problems for home owners. The equity in your home represents the part of your home that you actually own. If you lose equity in your home, you can recover it, but it will be more difficult than it was to build it in the first place.

When making monthly mortgage payments, a part of that payment goes towards the loan balance, increasing the equity in your home. At first, a large part of your payment will go towards the interest, but, as time passes, the portion of the payment that goes towards the principal increases, making your equity increase much faster. Home equity is considered an asset, it’s a part of your net worth, and you can use it if you need. Home equity can be used to pay for a second home, medical bills, education, or even retirement.

How Are You Losing Home Equity? What Can You Do About It?

Losing equity can be the result of a bad decision or the result of something that you can’t control. Either way, losing the equity in your home can even result in having to sell your home. Home equity is a powerful financial resource as long as it is used properly. Here’s how you risk equity in your home and a few ways of dealing with these issues:

  • Making major changes to the structure of your home. Transforming a basement into one or two rooms, two bedrooms into one bedroom, the garage into a room, or other major changes might seem like good ideas at the time, and you probably have a good reason for making these changes. Unfortunately, major modifications to a home’s structure or layout can possibly lead to a decrease in your home equity. Home improvement projects must be chosen very carefully if you wish to avoid a sudden decrease in the equity in your home.
  • Doing a cash-out refinance. This type of refinancing will increase the amount that you owe, and you risk ending up owing more than your home is worth. This means that the equity in your home will be reduced drastically, plus you will be paying interest for the cash that you took out.
  • Taking out a home equity loan. Home equity loans use the equity in your home as collateral. The upside is that, if you take out a home equity loan to remodel a kitchen or the bathrooms, the equity in your home may be replaced. Otherwise, your equity will decrease, while the amount that you need to pay back with interest will increase.
  • Not taking care of your home. Parts of your home like the roof and even appliances such as your air conditioner and heater don’t last forever. Not repairing them or replacing them, if needed, will result in a home equity decrease. Part of being a home owner means that you have to maintain your home and make necessary repairs, not only to live comfortably, but to also avoid damaging the equity in your home.
  • Economic crisis. This reason for losing equity is out of your hands and hard to predict, but, even if you are not affected by an economic crisis, the equity in your home will be. The recent housing market crash has resulted in millions of foreclosures, so if you live in a neighborhood where a lot of homes go into foreclosure, the value of your home will have to suffer.
  • Your neighborhood changes. Neighborhoods change all the time, especially after a recession. Your neighborhood might become more accessible to criminals, which will determine many people to move to different areas, and home prices to drop. Unfortunately, there is little you can do in this situation, and the equity in your home will most likely drop, as a result.

Losing home equity can be avoided by not making bad decisions and by resolving the issues that you have power over. In certain situations, there is little that you can do to avoid a drop in your home equity, but even these situations are somewhat preventable. You can recover from a loss in home equity, but it’s always better to prevent a loss than having to build equity again.

Shared Equity Mortgages- Are They Worth It?

Shared Equity Mortgages- Are They Worth It-150x150The purchase of a home involves a large investment, money that not everyone has available. A down payment of 20 percent or more will have to be made in order to avoid paying private mortgage insurance. Add several fees and closing costs to that and you are looking at an initial investment of tens of thousands of dollars. Borrowing that kind of money from a relative can be extremely difficult. Your family member could invest that money into something that will yield a nice return, so it would be unfair to deprive them of that. One solution would be for the relative or even a friend to become a co-investor in your home.

Shared equity mortgages allow you to find a co-investor that will provide part of the down payment, with the condition that he or she has the right to a percentage of the property’s value. While home prices can increase over time, and both investors can turn a profit, there is always the risk that home values will decrease, and both investors will lose money. Fortunately, real estate is a profitable investment more often than not, so a shared equity mortgage can make more sense than many other investments. By using a shared equity mortgage, parents also have the chance to help their children become home owners without having to dip into their investment funds.

Advantages of Shared Equity Mortgages

The largest advantage of shared equity mortgages is that, depending on everyone’s financial situation, one person can only occupy the home, while the other invests in it. This way, the person occupying the home doesn’t need good credit or money for the down payment, while the investor makes a larger return on his or her investment.

Another benefit is that someone can become a home owner much quicker than it would take if he or she took time to save money for the down payment and closing costs. Of course, the profit will have to be shared with the other investor in the future, so deciding if a shared equity mortgage is right for you depends mostly on your plans.

A third advantage is that both people who have invested in the home have the right to benefit from the real estate ownership tax benefits. When writing the shared equity mortgage agreement, the investor must not be considered a lender, because that would disqualify him from being entitled to tax benefits. Also, the person who will occupy the home must not be considered a tenant in the written agreement. This can be avoided by hiring an attorney to draft the shared equity mortgage agreement.

Disadvantages of Shared Equity Mortgages

The biggest disadvantage is that, if the housing market drops, the investor will lose money. That is a risk that investors take when making any investment, but the real estate industry has proved to be a fairly solid investment over time. Another disadvantage is that sharing equity can become expensive if the two parties involved start disagreeing on things like who pays for the property taxes and insurance. Also, the investors’ credit score can be negatively affected if the mortgage goes into default.

Shared equity loans can be a win-win for both parties, as long as there is a written agreement in place. One of the parties gets to become a home owner, without spending too much on the initial costs of buying a home, while the other party gets to invest their money into something that will most likely generate a profit.

Should You Rely on Home Equity When You Retire? Think Again!

Should You Rely on Home Equity When You Retire-Think Again- 150x150The effects of the recent economic crisis can still be felt, especially by home owners, who have found out that the value of their investment has decreased because the housing market hasn’t fully recovered yet. Because most investments have lost some of their value, a large number of home owners felt the need to tap into the equity in their homes in order to have enough money for their retirement plans.

Your home is, most likely your most expensive asset, so tapping into its equity will resolve the financial issues that you might have when retiring, but it might not be the best idea to do so. You can access the equity that you have in your home through a home equity line of credit, a home equity loan, or a reverse mortgage, but you should know that there are some risks associated with this practice.

What Are the Risks of Relying on Home Equity When You Retire?

No matter what your retirement plans are, you will still need a home after you are retired. This means that you might have to find other ways of funding your retirement, ways that are less risky. Tapping into the equity in your home through a home equity loan, line of credit or reverse mortgage can be very expensive, and you can end up spending more than you initially were prepared to, or even lose your home. The interest rates, fees, and closing costs are usually much higher for these types of loans than they are on conventional loans.

If you decide to buy a new home and move out, you may find that you can’t afford a new home because the equity in your current home is very low. An alternative to taking out a second loan which will affect your equity is to downsize your home, which will free up some of the equity that you have built up in your home. By doing this, you will have access to funds that will help you with your retirement plans, while still having a roof over your head.

Planning Ahead is Important

Starting to plan your retirement while you are still young will almost guarantee that your retirement will be problem-free. If you wait until you only have a few years left until retirement, there are many problems that could come up. The economic climate can shift radically in only a couple of years, or even quicker, affecting the housing market and the equity in your home. This makes home equity loans and reverse mortgages a very inefficient way of funding your retirement. Predicting what the economy will look like once you reach your retirement years is close to impossible, so knowing if your home will be worth more or less is anyone’s guess.

Not counting on the equity in your home and planning ahead can save you a lot of trouble and headaches once you retire. Investing in real estate properties, savings plans, and/or stocks is a much better alternative to taking out home equity loans and reverse mortgages, even if you didn’t start at a young age. People who are close to their retirement age can still successfully invest their money wisely, and have enough once they retire.

Relying on home equity when you retire is the least efficient way of coming up with retirement funds. You will most likely end up spending more than you have to, and even put your home at risk by defaulting on a reverse mortgage. Planning ahead and starting to invest at a younger age is something that you should look into, because it is much safer and will ensure that you won’t have to worry about your retirement funds.

Foreclosure with Property Liens and Second Mortgages- Find Out What Happens!

Foreclosure with Property Liens and Second Mortgages-Find Out What Happens- 150x150Many home owners need a second or even a third mortgage in order to cover the price of their home or for repairs and additions. Second mortgages are usually taken out to cover the high price of the home when a single mortgage just doesn’t cut it. Other types of loans, like a home equity loan, are generally taken out when the home needs repairs or if the owner wants to make an addition to the property, like a garage or a pool.

Home owners can also have liens on their properties. When you are sued, for example by a credit card company, for a sum of money and you lose the battle in court, the winning party can file a judgment lien, which will be attached to your property. This article will describe what happens to second mortgages and liens if your home goes into foreclosure.

What is a Second Mortgage and a Lien?

Second mortgages are pretty much just like any other mortgage loan, but they have some advantages and disadvantages of their own. Typically, borrowers will take out a second mortgage in the form of a home equity loan by tapping into home equity. This type of loan is actually a line of credit which is used much like a credit card. The borrower withdraws the amount that he or she needs, which will have to be paid back with interest. Home equity loans are usually used by home owners who wish to make repairs or improvements to their homes.

A lien is created and attached to your property when you lose a lawsuit that involves a sum of money. The property lien gives the creditor the right to repossess your assets in order to satisfy your debt. A judgment lien will prevent you from selling your property until it is removed.

The priority of a lien is determined by the date when it was recorded. Usually, first mortgages are considered first lien, second mortgages are considered second lien, and judgment liens come in third position.

What Happens After Foreclosure?

When a home is foreclosed on, it is important to know who gets paid first. Normally, first mortgages get paid off first after foreclosure. After the foreclosing lender receives his money, the remaining funds will be used to pay off second mortgages and any liens on the property. If the property doesn’t sell for more than what the mortgage loan is worth, then the foreclosing lender gets all the money, and any second mortgages or liens will be wiped out, but the debt won’t be eliminated.

A common mistake that many people make is thinking that second mortgages or liens are paid off once the property is foreclosed on, even if the selling price wasn’t high enough to satisfy these debts. After a foreclosure, the second mortgage and liens are removed from the property title, but the previous owner will still have to pay his or her debt.

The lender that granted you the second mortgage can sue you in order to try to recover his money. However, this will only happen if the debt wasn’t paid off after the foreclosure. Unfortunately, lenders for second mortgages usually don’t receive enough to satisfy your debt after foreclosure, so there is a strong chance that they will sue you. Liens have also been wiped out, but the creditor will still go after you in order to recover the money. Liens that were previously attached to the foreclosed property can still be attached to other real estate property that you own or will own in the future.

Having a second mortgage or lien can create problems even after foreclosure, if they are not paid off. So your best choice is to make sure that you protect yourself by doing some research beforehand, so you will know what to expect if your home is in danger of being foreclosed and you have a second mortgage and liens on it.

You Can Borrow How Much with A Reverse Mortgage?

You Can Borrow How Much with A Reverse Mortgage- 150x150Reverse mortgages are a way for seniors over 62 to receive much needed income. Home owners over 62 can take out money from the equity in their home, without having to pay back the loan until they pass away or sell their home. The money from a reverse mortgage can be used for pretty much anything – traveling, medical bills, or home repairs.

The sum of money that you receive from a reverse mortgage is not taxable and can be in the form of a lump of cash, monthly payments, or a line of credit, which can be used much like a credit card. After the borrower dies or sells the home, the reverse mortgage loan will have to be paid back with interest, usually by the borrower’s heirs.

How Much Can You Borrow?

There are several factors that are taken into consideration by the lender when deciding how much you can borrow. The most important is the value of your home, followed by age, current mortgage rates, and lending limits, if applicable. The maximum limit for a reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is $625,500. Private lending companies also offer reverse mortgages, which may have a higher maximum limit, but their loans will not be insured by the Federal Housing Administration (FHA). The general idea is that the older you are, the more your property is worth, and the lower the current interest rate is, the more you will be allowed to borrow.

How much you can borrow also depends on how you wish to receive the payouts. You can choose to receive all the money at once, in a single large payment, which would be useful if you need money for medical bills or repairs. Alternatively, you can choose to receive the money as monthly payments, which is helpful if you only need money for month to month expenses, such as bills. Also, you can choose to use the money from the reverse mortgage as a credit line, mostly useful when you have unexpected expenses.

If you choose to receive the whole amount at once, the interest on the loan will increase quicker than the other choices. If you choose to receive monthly payments, you will keep receiving them until you die, even if the total amount will be higher than the value of your home. When choosing to use the money as a line of credit, the unused funds will increase annually, meaning that you will gain access to larger funds as the years go by.

A reverse mortgage is a blessing for seniors who need money and don’t have a good source of income. The maximum limits are high enough to accommodate most senior borrowers, and they won’t have any trouble borrowing the money because there are no credit requirements and monthly mortgage payments due. The amount that you will be able to borrow is related to your age, home value, interest rate, and payout type, but you can quickly get an estimate by using an online reverse mortgage calculator or by simply consulting with your reverse mortgage lender.

Top 10 Ways to Gain Home Equity

Home-Equity-Loan-150x150Home equity enables a homeowner to use their home as collateral to access more credit; in simple terms, it is referred to as a second mortgage. Borrowers often rush into home equity loans because they feel that these are relatively safe, which they certainly can be if you are careful and do your research before settling on one. Having equity is very important for you saving money in the long run and keeping your home marketable at a potentially higher value than what you paid. Read on to learn about its advantages as well as the ways you can  gain home equity.

Advantages of Home Equity

  • Lower interest rates. In case the interest rate for your original mortgage is higher than the prevailing rate, or if it has a persistently increasing adjustable rate, then a lower interest rate will lower your monthly costs while increasing your home equity. If the interest rates have decreased and you took a fixed rate mortgage earlier on, you can opt to refinance for an adjustable rate mortgage.
  • Higher borrowing capacity. A second mortgage will enable you to borrow more money, thus bringing your indebtedness in the home to around 125 percent or even more than the set value. If the home equity loan rates are volatile then you can opt for fixed interest rates even though they will be slightly higher.
  • No interest charge until cash is utilized. If you haven’t used the extra cash then you will not be charged any interest. This cash is a great financial tool which you can decide to use for home improvement or for other needs. If the money is needed immediately, only a small penalty will be applied.

Ways to Gain Home Equity

Home equity enables the homeowner to qualify for a higher loan amount, enjoy tax deductions and easily qualify for another loan even with a bad credit rating. The extra money obtained can be used to help pay for a child’s college education, consolidate other debts or remodel one’s current home. To enjoy these and other privileges, here are some tips and tricks you can apply to obtain home equity:

  1. Reduce the balance on your mortgage. As you consistently pay down all of your mortgage balance, you are clearing a portion of both the interest and the principal. These payments must be made on time. As you keep reducing the mortgage balance on your home, the equity value continues to rise.
  2. Increased home price. Watch for changes to your home’s value based on market factors. For example, if it costs $200,000 and the price increases to $270,000 after five years, then your home equity will have increased by $70,000. On the other hand, this price may also come down any time. Unfortunately you have little to no power over the market’s influence on home values.
  3. Maintain your home well. Taking good care of your home and keeping it updated is paramount to increasing the value of your home and gaining more home equity.
  4. Shorten the mortgage term. If you refinance the mortgage so that you pay the balance on your home for a shorter term, say 15 years instead of the original 30 years, then you will clear the loan balance after a short while. This will mean that after a few years, you will have doubled the equity on your home compared to the initial mortgage repayment plan.
  5. Pay a larger down payment. Before you take out a mortgage loan initially, you can commit a lot of money to the down payment so that you have a lower mortgage balance. For you to obtain more equity on your home, it essentially means that you have to have a lower-to-value ratio on your loan.
  6. Keep up your home’s appearance. When your home stands out from the rest, it makes a difference in your home’s value. Fresh paint, a well-maintained yard and garden, and a clean look will increase your home’s value. The highest return on investment generally comes from kitchen and bathrooms, so be sure these are updated and well-maintained.
  7. Opt for a biweekly payment plan. The best way to build equity on your home is to make payments against your balance as regularly as possible. A biweekly payment means that you will be able to pay about 26 times throughout the year instead of the typical 12 when you pay monthly. This means more commitment to clearance of your mortgage balance—which has affects your equity positively.
  8. Snowball all other savings to the mortgage. If you have other debts you are paying aside from the mortgage, then you can channel any savings you have towards mortgage repayment. If you have completed making payments on something else, like a car loan, channel the same amount you’ve been paying towards repayment of your mortgage.
  9. Channel your budget excesses to the mortgage. If you have a monthly budget for all of your expenses and you’ve saved some $100 or even less then you should commit this amount of money towards repayment of the mortgage.
  10. Make extra income. If you’ve been earning $3,000 a month, try aiming for slightly more, like $3,200- a small increase in your income allotted to your mortgage could end up making a huge difference in the amount you pay over the course of your loan.

Building equity on your home is a strategy which you must lay out and commit yourself to. If you don’t take the time and care to build equity in your home then you risk suffering negative equity by market forces, which can badly water down the value of your home and cause you to owe more on your mortgage than your home is worth.

Top 10 Things to Know if You’re Interested in a Reverse Mortgage

reverse-mortgage-150x150A reverse mortgage enables you to borrow money against the value of your home. The mortgagor (lender) does not expect any principal and interest repayments until you either sell the home or die—whichever comes first. Lenders always require that you don’t have any other loans before they can grant you a reverse mortgage. A prime requirement is that if there is any lien on your home, then it must be repaid off with the proceeds from the reverse mortgage. The number of people opting to take reverse mortgages is on the rise because of the extra cash that one retains at the end of the deal. Could this be an option for you?

Benefits Of A Reverse Mortgage

  • There are no monthly repayments. Payments are made only when you refinance, sell your home or die—whichever comes first. This enables you to enjoy doing other things instead of committing to monthly repayments.
  • There are no prepayment penalties. HECM, FHA-insured secured mortgages can be fully or partially paid any time at no additional fees or costs.
  • Tax benefits. The income obtained from a reverse mortgage deal is tax free. The homeowner can therefore use the money obtained to fulfill other financial obligations.
  • Simple qualification requirements. Unlike other types of mortgages which require the borrower’s employment details and credit rating, only the borrower’s age, value of the home and the current interest rates are required.
  • Asset protection guarantee. The amount payable at the end of the period of the term for the reverse mortgage is the sum of accrued interest plus the actual fees received. The amount repaid will therefore never exceed the value of the home; so long as you sell the property to repay this reverse mortgage.

Important Things To Know About A Reverse Mortgage

  1. Qualifications. For you to qualify for the FHA HECM reverse mortgage, you must be a homeowner aged 62 years or more. You must rightfully own your current home or have a very low mortgage balance that can be cleared by proceeds arising from the reverse mortgage. You must legally reside in that home. FHA requires that you subscribe to a HECM counselor to receive relevant consumer information at a very low cost or free of charge just before obtaining the loan.
  2. The title to the home. Unlike other types of mortgages where the title is retained by the lender until full payment is made, the owner retains the title. However, payment for the home must be made at the end of the mortgage term.
  3. Property taxes and insurance. The borrower continues to pay homeowner’s insurance and property taxes. As a homeowner, you are expected to reside in that home as their primary residence and maintain it in good condition—which allows the homeowner to keep the loan according to their wishes.
  4. It is non-recourse. Neither the homeowner nor their heirs will be responsible for a part or any part of the loan which can’t be repaid from equity resulting from the home. The liability of the reverse mortgage borrower is therefore limited to the value of the home.
  5. Modes of receiving payments. There are five modes of payment that you can select as a homeowner:
    • Line of Credit- unscheduled installments without a regular pattern which you select as you wish.
    • Term- equal monthly payments that last for a fixed period of months agreed upon.
    • Modified Term- combination of both the term and the line of credit according to the homeowner’s wishes until exhaustion of the whole amount.
    • Tenure- equal monthly payments proceeding to the borrower as long as they retain the house as their primary residence.
    • Modified Tenure- this is a combination of both the term and the line of credit as long as the homeowner still resides in the home.
  6. Inheritance of the estate. In case the home is resold or not used as the borrower’s primary residence, any interest, cash or other charges arising from the HECM must be repaid in good time. If there are any proceeds beyond these amounts they revert to your spouse, or estate; the remaining equity is transferable to your heirs.
  7. Eligible types of homes. FHA requires that your home must be either a single family house or a 2-4 unit house with one of them being occupied by the owner in person. Other HUD approved manufactured homes and condominiums which meet the stipulated FHA requirements are also eligible for a reverse mortgage.
  8. Comparison with a home equity loan. A home equity loan or second mortgage requires that applicants have adequate income not only to qualify for the loan, but also to demonstrate capacity to make monthly payments on the interest and the principal amount. On the other hand, a reverse mortgage is different because it pays you rather than having you pay. However, you need to pay utilities, insurance premiums against floods and other hazards as well as real estate taxes.
  9. Right of rescission. What if you change your mind after taking a reverse mortgage? Well, the HECM allow you to cancel your loan after three days if you decide otherwise. This is referred to as the three-day right of rescission. Inquire from the mortgagor about their requirements because different lenders have varying rules on the same.
  10. The amount you can receive from a reverse mortgage- the amount entitled to a homeowner from a reverse mortgage transaction depends on the age of the borrower, the prevailing interest rate, the initial mortgage insurance premium (HECM SAVER or HECM Standard) and the lesser of the appraised value of the home, the sales price or FHA limit (currently $625,000). You receive a higher amount if you are older and the interest rate is lower.

A reverse mortgage enables the homeowner to create more money for alternative uses, especially at the age of 62 when productive capacity is very low. However, you should conduct thorough research on the overall loan costs before making a decision.