I’ll give you a “real world” explanation of how Reverse Mortgages really work.
How would you like for a lender to make you an INTEREST ONLY loan on a portion of the equity in your home?
For example, if you're 70 years old, a lender will provide you a loan of 60% of your home's value.
Using $400k as the home value, the lender will loan you $240k TAX FREE.
Remember there are NO principal payments on a RM. The loan amount does accrue interest and you're responsible for RE taxes, HOI and HOA fees. The loan never has to be repaid unless you or your estate wants to.
The way I structure RM’s, the lender’s interest rate is roughly 4% - 6%.
Home appreciation in the Richmond VA area is roughly 6% - 10% annually.
PLEASE notice in this example, you will be accruing interest of 4% - 6% on $240k, BUT receiving home value appreciation of 6% - 10% on $400k.
What this means is the appreciation of a larger amount should ALWAYS be greater than the interest on a smaller amount!
What could you do with the loan amount; pay off current mortgage, pay for medical needs, buy a 2nd home condo in a warmer climate, spend this TAX FREE cash in any manner you want!
NOW TO IDEAS THAT YOU WILL NOT HEAR FROM ANYONE ELSE CONCERNING RM'S!
The greatest fear people have with RM'S is that the loan balance will exceed the home value at some point.
If you can afford to pay the 4% - 6% INTEREST ONLY amount, then the loan balance will NEVER increase.
If you want the proceeds to purchase another home or condo in a warmer climate, remember the interest balance does not increase, BUT now you will be receiving home value appreciation on TWO properties.
I have more specific ideas that we can go over if you have further interest.
Why not call or email me with your age, home value and I can tell you what to expect!!!