Pay Off an Existing Mortgage with the Help of a Reverse Mortgage
Going into retirement with a mortgage payment comes with pros and cons. While it would be nice to enter retirement debt-free, the reality is 1 in 4 retirees have an outstanding mortgage. Paying off an existing mortgage is one of the most common reasons senior homeowners get a reverse mortgage. If you have significant equity, a reverse mortgage could be used to pay off your loan and eliminate monthly payments, giving you more income to cover monthly living expenses.
With a reverse mortgage, homeowners age 62 or older do not make payments, and you do not have to repay the loan as long as you live in the home. You do have to maintain the home and pay your property taxes and homeowner’s insurance. You can receive payments as a lump sum, a line of credit, or as monthly income, or a combination of the three.
Here’s an example…
Let’s say a married couple owes $70,000 on an existing mortgage of a home valued at $300,000. Based on their age, location, home value and interest rates, they can qualify for up to $162,000 principal amount under the reverse mortgage program. After they pay off their existing mortgage, and the closing costs and mortgage insurance fee, they could have access to $79,124 to spend how they choose. FHA rules do limit the amount the homeowners can borrow the first year.
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More on Paying Off an Existing Mortgage
By tapping into their equity, in addition to paying off their current mortgage balance, homeowners can use the funds to:
- Pay for medical expenses, prescription drugs, in-home care.
- Home remodeling or repair.
- Help family members.
- And much more.
For retired seniors, their mortgage debt contributes greatly to their monthly cost of living, leaving little room for emergency expenditures like healthcare or home repair necessities. Speak with a Certified Reverse Mortgage Professional to see if a reverse mortgage is the right solution to pay off an existing mortgage so you can increase your retirement funds.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.