In today’s environment of historically low interest rates, property owners who are at least 62 years old and been in their homes for a number of years may consider using the equity that has accrued over that time to their advantage.
Still a relatively new concept in the world of residential real estate, one way to do that in the 21st century is by utilizing a program that revolves around the idea of reverse mortgages. Still a largely unknown financial tool, reverse mortgages offer a powerful, yet widely misunderstood, way to use the equity from your home in a worthwhile and beneficial way.
The benefits can be powerful, though obviously not right for everyone – nothing is a perfect end-all for all people and for all situations. Knowledge is key, however, and the Realtor members of the Sussex County Association of Realtors (SCAOR) encourage the use of reverse mortgages, when applicable, as another tool in anyone’s long-term financial toolbox.
“With today’s record low interest rates, it could be the perfect time to look into something like a reverse mortgage, if you’re at a point in your life when using your home’s equity could benefit you,” says Trina Joyner, 2012 president of SCAOR. “It’s certainly not for everyone, but it does have its advantages. We would encourage anyone to learn more about reverse mortgages, and all other financial options tied to their homes, for possible use in their long-term planning.”
According to Rehoboth Beach based loan consultant Joe Della Torre, who also serves as the chairman of SCAOR’s Affiliate Committee, utilizing this relatively new concept can have multiple advantages that include:
• Access to extra funds. For homeowners in their so-called “golden years,” they can actually receive monthly payments instead of making them.
• Flexible Qualifying Guidelines. There are no income, employment or credit qualification restrictions when applying for a reverse mortgage.
• Payment Disbursement Options. You can take your loan proceeds in a lump sum, or in monthly installments to supplement your income, or even as a line of credit.
• Deferment of payments. These payments are not due until the homeowner either moves, sells the home or passes away.
While the advantages of reverse mortgages are many, particularly for senior citizens looking to maintain their standard of living later in life, there are also red flags to be aware of. The Consumer Financial Protection Bureau is working on new rules for improving the disclosure of reverse mortgages and the hidden risks, as well as implementing greater supervision of lenders who issue reverse mortgages.
It’s important to remember, for instance, that homeowners taking advantage of reverse mortgage programs are still responsible for paying property taxes, maintenance fees and any insurance payments on their homes.
As with any financial program, it’s important to learn all possible advantages and disadvantages before “signing on the bottom line.”
“While reverse mortgages can prove very useful to many older homeowners, it’s important to note that these programs are not to be perceived as ‘free money,” which apparently some borrowers across the country have felt they are,” says Joyner. “As with anything else, knowledge is key. If interested, learn about the possible benefits and potential pitfalls of reverse mortgages through your lender or Realtor of choice. This way, you and your family can make an informed decision.”
The Sussex County Association of Realtors was chartered in 1949 and has steadily grown in size, scope and mission during its more than six decades in Sussex County. It is a professional trade association with goals of carrying out a program of education and advocacy for real estate in the county.
SCAOR is a resource for the public, as well as a recognized advocate for property rights and property owners in Sussex County. The association also monitors legislative issues on the local, state and national levels that may impact home ownership in the area.
To read more about issues related to Sussex County’s real estate industry, visit SCAOR’s website at www.scaor.com.