#reversemortgages

As we age, many of us find ourselves with a valuable home but not enough cash to cover everyday expenses. A reverse mortgage can help. It allows homeowners, usually 62 or older, to tap into their home’s value without selling it.

What Is a Reverse Mortgage?

A reverse mortgage is a type of loan. Instead of making payments to a lender like with a regular mortgage, the lender pays you. You can get the money in different ways: a lump sum, monthly payments, or as a line of credit to use when you need it. The loan doesn't need to be paid back until you sell the home, move out, or pass away.

How Does a Reverse Mortgage Work in 2024?

In 2024, reverse mortgages still have some basic rules:

Age Requirement: You need to be 62 or older.

Home Ownership: You must own your home or have a lot of equity in it.

Primary Residence: The home has to be where you live most of the time.

Here’s how the process works step by step:

Counseling: You’ll first meet with a housing counselor who will explain the details, including costs and benefits, to make sure you understand everything. This step is required.

Application: After counseling, you can apply for the reverse mortgage with a lender.

Home Appraisal: Your home’s value will be checked through an appraisal. The more your home is worth and the older you are, the more money you may be able to borrow.

Getting Your Money: Once approved, you can choose how to receive the money. In 2024, the most common reverse mortgage is called a Home Equity Conversion Mortgage (HECM), which is insured by the government.

Repayment: You don’t make payments during the loan. It only needs to be repaid when you sell your home, move out permanently, or pass away. When that happens, the home is typically sold, and the money from the sale goes toward paying off the loan. If there’s extra money, it goes to you or your heirs. If the home is worth less than the loan, insurance will cover the difference, so your heirs won’t owe anything.

Pros and Cons of a Reverse Mortgage

Pros:

You get extra money without selling your home.

You don’t have to make monthly mortgage payments.

You stay in your home as long as you like.

Cons:

Interest builds up over time, which reduces the amount of money you (or your heirs) may get when the home is sold.

It might affect your eligibility for benefits like Medicaid.

It reduces the equity in your home, leaving less for your heirs.

Is a Reverse Mortgage Right for You?

Reverse mortgages can be helpful for older adults who plan to stay in their homes and need extra cash for living expenses or to pay off an existing mortgage. However, they come with costs and can eat up the equity in your home. Before deciding, it’s a good idea to talk to a financial advisor to make sure it’s the right choice for your situation.

Final Thoughts

The demand from purchasers in buying homes has been growing in strength and there is no end in sight and bidding wars have become almost the norm, especially from those that have been in rentals.

I have been conversing with many buyers and they want to take advantage of the historically low-interest rates and the lower cost per month to purchase making it more affordable and are willing to provide higher offers and move out of their current rental (or parents home) into an ownership position.

Many are looking at the long term (not the short term) in building equity and wealth as well as participating and growing roots in their communities. However, many are losing the battle to purchase due to bidding wars, lack of inventory as well as job loss due to COVID-19.

Banks have been more carefully scrutinizing jobs and income to eliminate those that they feel might be a greater risk of not being able to pay.

With debts increasing, debt to income ratios will also come into play when determining mortgage approvals. Currently, there is a multitude of reasons why inventory is historically low and will continue to be that way. Prior to COVID-19, there was a housing shortage. Demand had been continuously reducing what was available.

Also, there were and are still those investors throughout the U.S. who instead of fixing and flipping homes were actually keeping and holding onto homes due to the demand and availability of renters who weren’t or couldn’t buy.

It was a perfect and safer environment for investors to build their long term wealth compared to other investments, like stocks that were and are perceived to be riskier with less control.

Another action related to lower inventory, noted by a study by RedFin a real estate brokerage, was the fact that a greater percentage of homeowners continue to stay in place and now are staying anywhere from three to five years longer than they did in 2010, (around 13 years) depending on where you are referencing around the U.S.

Many more are renovating for their later years as people are living longer. As more downsize and still desire to be in a home as opposed to a development or building,

I would imagine ranches will continue to become more and more popular as there are generally fewer steps to deal with. Also, due to the very low-interest rates in refinancing and availability of reverse mortgages using the equity to live on, we are seeing an increase in applications allowing more to stay in place further reducing future inventory.

During the Covid-19 greatly impacted the public from earning a living and foreclosures and evictions were halted and now have been extended a second time until August 31; which will hopefully allow those additional time to figure out their next consideration in moving. This too has also reduced available inventory initially for investors who would put the house back onto the market, for end-users who would maintain it as a primary residence.

Lately with Florida, Texas, California and other states seeing huge infection spikes on a daily basis, due to early openings of businesses and lack of people wearing masks many that are coming to New York State (now having some of the lowest daily infection rates in the U.S.), are required to quarantine for 14 days.

However, monitoring, controlling, and enforcing the rules with the influx of returning or new residents has been challenging.

I believe that those who had been thinking and potentially considering decisions on selling here and other safer states to permanently relocate to their second or another home have seen the Covid-19 infection rates increase in more than 50 percent of the states, have been put on the back burner for the foreseeable future, thus keeping much-needed housing stock off the market.

Aging in place is another reason and in September 2018, data was compiled and released as part of the senior advocacy group’s Home and Community Preferences survey, showed that almost 80 percent of adults age 50 and older wanted to remain in their homes and communities as they age.

For now, as long as the demand is greater than the available inventory and low-interest rates prevail allowing more to enter the market, prices should remain strong over the next several years. But after that period with so many variables in the mix, it’s anyone’s guess as to what changes will occur.

Momma Considers a Reverse Mortgage in the Age of Trump #donaldtrump #foreclosure #reversemortgages #stevemnuchin

Read “Trump Treasury pick Steven Mnuchin has a ‘widow foreclosure’ problem” at CNN Money, and “Steve Mnuchin: Evictor, Forecloser, and Our New Treasury Secretary” at American Prospect.

From the American Prospect:

Throughout his presidential campaign, Donald Trump criticized Wall Street bankers for their excessive political influence…

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