Remember when, before the last real estate bubble, you had a home equity line of credit? What happened when property values dipped? Or, were you one of the many homeowners seeking to refinance to take out money you’ve worked so hard for trapped as equity in your home only to be provided a line of credit that dwindled or disappeared? Will that happen when you take out a reverse mortgage?
Assuming, you continue to always make your regular homeowner’s insurance and property tax payments when due, your reverse mortgage availability will not change once you’ve closed on your new loan. As the real estate market appreciates, your reverse mortgage line of credit will also grow, giving you the ability to pull additional funds out if needed in the future. If the real estate market depreciates your reverse mortgage line of credit will not depreciate with it.
Finally, what happens when you eventually leave your home and the outstanding balance of your reverse mortgage is more than the worth of your home? Reverse mortgage loans are considered “non-recourse loans.” This means that you can never owe more than the value of your home at the time you or your heirs sell your home to repay your reverse mortgage. If your loan is a Home Equity Conversion Mortgage (“HECM”), the reverse mortgage debt may be satisfied by paying the lesser of the mortgage balance or 95% of the current appraised value of the home.
Here’s a great infographic from the National Reverse Mortgage Lenders Association:
(Click on infographic to view larger)
Give us a call or email to set-up a no obligation meeting to discuss whether a reverse mortgage is a proper strategy for you!