Interview with Natalya Hill from Hamilton Group Funding
on Reverse Mortgages
What is a reverse mortgage?
A reverse mortgage is a source of funding for those over 62 years old. It gives you the ability to tap into the equity of your house – whether you own your home free and clear or if you have a small balance on it. Principal and interest payments do not have to be made on the money withdrawn, just the taxes and insurance that are due on the property each year. You can take money out of the home’s equity and use it for a variety of reasons, including supplemental income, home improvements and trips. To more fully understand the process, we sit down with people and explain their options, which differ depending on their age.
Applying for a reverse mortgage is not something that you should rush into. We make sure that everyone involved in the decision is aware of what they are doing, since a reverse mortgage is a little bit different from your traditional mortgage. Although it is regulated by the government, people can be a little intimidated when they don’t have all the facts or any knowledge about them.
Other ways that people can use a reverse mortgage.
Let’s say that you have a home that is valued at $200,000 that you own free and clear. You can take out up to 60% of home’s equity immediately and use the remaining 40% as an equity line. If you don’t need the funds right away, you can also take the entire amount in a line of equity to be drawn upon later. The money can be invested in other things such as an annuity or life term insurance policy. If this is the case, we would bring in an insurance or investment professional that could explain available options.
What is the main reason that people would want a reverse mortgage?
We will see a lot of people whose parents are on a fixed income. Instead of having to be financially reliant on their children, the parents can take a lump sum payout and convert it to an annuity that will pay out every month fixed for life. They can also set it for a shorter time if they need a higher monthly amount. With many retirees not having the necessary funds available during their retirement, and with costs like medical expenses rising, it gives people the ability to have another source of income to help them meet their financial obligations and live comfortably during their years in retirement.
What are the three most important things you need to look out for when doing a reverse mortgage?
First off, you should do your homework. Meet with a lender and ask questions, lots of them. There’s no such thing as a stupid question. Take your time. Secondly, don’t let someone push you into making a decision. A lot of people get into trouble because someone is pressuring them. If this happens, you need to run. You need someone who is going to give you the time to answer your questions and who will make you feel really comfortable. If they are not able to answer your questions or get the answers, then that may be a clear-cut sign that a person is not experienced enough. The guidelines are constantly changing so you need to make sure that your lender is current and providing you with the most accurate and up-to-date information. Finally, if there are other people – such as children or others that are involved in the decision – they need to be sitting in on the meeting and have their questions answered as well. Everyone needs to be equally informed and comfortable with the way things are being handled. All involved must be on the same page.
If you have and questions or would like more information on reverse mortgages, please contact Natalya Hill at 919-614-0388 or www.natalyahill.com.