Buying a First Home
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Buying a First Home

After 10 years of marriage, I’m still enjoying living in the first home I moved into with my husband. Buying a first home can be one of the most exciting events in a person’s life. Before making this important expenditure, people need to first sit down and determine how they will successfully finance it. After all, a home will likely be the most expensive purchase you make in your life. Talk to a loan officer and determine how much money you can reasonably borrow. Then, decide how much money you want to use as a down payment. You also must decide how many years you will finance your home for. On this blog, you will learn about the process of buying a first home with a loan.


Buying a First Home

A Guide On Reverse Mortgages

Irma Bates

Did you know that a senior homeowner can get a reverse mortgage that does not need regular payments? This article highlights how reverse mortgages work to access home equity and avoid common pitfalls. 

What is a Reverse Mortgage?

In a reverse mortgage, individuals borrow against the value of their home. However, a reverse mortgage differs from a typical mortgage in terms of payment. Typically, borrowers with a standard mortgage have to pay monthly payments to the lender. In comparison, a homeowner with a reverse mortgage does not make regular loan payments. Instead, the lender recovers the principal amount and the interest when the house goes on sale after the homeowner dies or moves. 

The following are the three types of reverse mortgages: 

  • Single-purpose reverse mortgage 
  • Home equity conversion mortgage (HECMs) 
  • Proprietary reverse mortgage 

How Does a Reverse Mortgage Work? 

One accesses home equity by borrowing against their house. The home becomes the collateral for the loan. If and when the homeowner dies or moves, the house goes on sale, and the proceeds repay the loan. At times, the sale proceeds may be more than the loan amount. Thus, the excess amount goes to the homeowner or the estate. Notably, lenders structure the transaction so that the reverse mortgage amount does not exceed the house's value. In addition, the lender requires the homeowner to stay current on property taxes and homeowners insurance to preserve the house's value. 

Pros and Cons of Reverse Mortgages 

Reverse mortgages have several benefits. Primary, the mortgage lets you have access to cash based on your home equity. You can use the money to finance pressing needs, including paying off pending mortgage or medical bills. This way, you can access home equity without having to sell your home. Homeowners do not need an income or good credit history to qualify for the loan. This flexibility makes reverse mortgages more accessible. Besides, borrowers need not make any loan payments for the duration they will occupy the home. 

The loans also come with a few drawbacks. Essentially, you end up spending a significant amount of equity on the loan principal, fees, and interests. You will need to have accumulated home equity to qualify. Besides, you cannot pass the home to your beneficiaries. Think through if you have other people sharing the house. Again, there is the risk of outliving the mortgage proceeds. Therefore, budget carefully when picking up a payment plan.

A reverse mortgage helps you convert part of your home equity into cash without selling your home or making monthly payments. Should you consider this option, review the pros and cons of the different types of reverse mortgages, including lender-specific terms.