Reverse mortgages have experienced significant popularity since their inception in the U.S. in 1988. This program is designed to help people of retirement age, generally 62 or older, to stop making mortgage payments and instead receive payments that come from the equity they’ve built in their homes.
When retirement funds are short, people have options. It’s a great way for seniors to make ends meet if they’re in a pickle, or if they simply want to capitalize now on the equity they’ve built in their home. However, there are a lot of fees associated with these sorts of loans that make them less desirable than they seem when you’re considering the basic facts (i.e., no more mortgage payment, you get money now, and your house still passes on to your heir!). It’s important that seniors looking into reverse mortgages understand the true costs associated with these types of loans.
Essentially reverse mortgage officers, also known as reverse mortgage originators, earn a pretty penny helping people live out their days in their family home. The laws state that for a house appraised at under $125,000, reverse mortgage originators may charge up to $2,500. For homes under $200,000, they may charge 2% of the home’s value, and 1% on anything higher than $250,000. All told, the cap on reverse mortgage loan originator fees is $6,000. Chances are, if you’re looking at a reverse mortgage, that amount of money might be a lot more than what you’ve got to spend.
It’s important to note that in reverse mortgages, the homeowner is still responsible for many of the costs associated with home ownership, such as repairs, taxes, and insurance.
These loans generally have better interest rates than home equity loans, which makes them look like the more attractive option under a certain light, but what if there was another way to pull equity out of your home while still living in it?
The folks here at Easyknock have come up with an option that might be feasible for many folks who have considered a reverse mortgage. Sell and stay, also known as residential sale leaseback, allows you to sell your home, giving you access to all the equity you’ve built in your home, but then lease it back. Essentially, you rent the very same home that you used to own.
We’ve always been told that our home is one of the most valuable investments that we’ll ever make. However, that equity doesn’t mean much if you have no means or desire to move and therefore hindered access to it. There are government-imparted restrictions on the amount of equity you can even receive from a reverse mortgage, but those restrictions aren’t found in sale leaseback agreements.
Before you jump in to a reverse mortgage or a high-interest home equity loan where you’ll only be able to get part of your money, check in with us here at Easyknock to see if Stay and Sell might be a better fit for you.