For many homeowners aged 62 and above, reverse mortgages can be an excellent retirement tool. It allows you to take out a loan against the equity you have built up in your home. It not only supplements your income, but it also helps you to live in your home for as long as you want. However, there are several factors to weigh before applying for a reverse mortgage — this mortgage company in Plymouth, Minnesota is going to explain everything you’ll need to know below.
The Amount You Get
The amount you can borrow as a reverse mortgage is determined by the amount of equity you have in your Plymouth, Minnesota home. If possible, have a home appraisal performed to determine how much you are eligible to borrow. You should check to see if the amount is sufficient for your needs before making a final decision.
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Payment Options
You can receive funds from a reverse mortgage in several ways. You can get it in the form of a lump sum, a monthly payment, a line of credit, or a combination thereof. Before choosing an option, ask yourself why you need the money. If you need to cover a big one-time expense, you can think about going for a lump sum. If you need the funds for basic living expenses, you may want to go for a monthly payment option. If you only need the money for emergencies or unforeseen expenditures, a line of credit might be the ideal option.
Fees
Reverse mortgages come with a slew of fees, including a HECM counselling charge, loan origination fee, mortgage insurance premium, and closing costs. These can amount to 3-4% of the loan amount and are usually bundled into the loan. Before you sign an agreement with a mortgage company in Plymouth, Minnesota, make sure you understand all the fees involved.
Repayment Plan
Reverse mortgages, unlike conventional mortgages, do not require monthly payments. They only become repayable after you die or move away from your primary residence. If you plan on leaving your home in five years, this is not an option you should consider. If you do, you will be unable to recoup the closing costs you pay against the reverse mortgage you borrow.
Use
How you use your mortgage funds will determine whether you benefit from taking out a reverse mortgage. There are no restrictions — you can use it toward a long overdue family vacation, a bathroom or kitchen remodel, or to cover your monthly living expenses.
Alternate Options
If you are strapped for cash and your family members have no interest in keeping your house after you pass away, a reverse mortgage might be right for you. However, if you look at the big picture, you may find many other options to consider. For example, you could sell your home to your children, refinance your current mortgage, or even downsize and move to a retirement community.
Conclusion
A reverse mortgage is available to all Plymouth homeowners aged 62 and above. However, it is not for everyone. Before making any final decisions, make sure you understand the nuances of your mortgage. Also, don’t forget to look for alternatives that may help meet your needs better than a reverse mortgage.
Are You Looking for a Mortgage Company in Plymouth, Minnesota?
If you are looking for an experienced and licensed mortgage company in Plymouth, Minnesota, Compass Mortgage is ready to help. Contact us at (877) 793-9362 or get in touch with us through our website to learn if a reverse mortgage is right for you.