Home Equity

Reverse Mortgages in Georgia: What to Know

September 26, 2022

Looking for reverse mortgages in Georgia? Here’s everything you need to know.

If you’re a homeowner nearing retirement age living in Georgia, it’s important to be aware of all financial options available to you. One in particular to consider are reverse mortgages. In Georgia, the median age has jumped over 4% over the past decade, meaning more people than ever are nearing retirement age and could be in the market for alternative financial solutions.

Some homeowners in Georgia may benefit from reverse mortgages, also known as a home equity conversion mortgage (HECM). This enables eligible borrowers to tap into a portion of their home equity and convert it into loan proceeds that can be used as cash. Homeowners in Georgia can use a reverse mortgage in order to achieve financial goals such as:

Supplement retirement income
Buy a new home
Maintain lifestyle
Prepare for a secure financial future

How Do Reverse Mortgages in Georgia Work?

Reverse mortgages in Georgia are loans designed for homeowners aged 62 and older and is insured by the Federal Housing Administration (FHA), ensuring that borrowers will not owe more than the home is worth at maturity.

The borrower does not give up ownership or control of the home and doesn’t have to make monthly mortgage payments. But the borrower is responsible for occupying the home as their primary residence, keeping up with property maintenance, and staying current on paying property taxes, required insurance, and any homeowners’ fees.

You can determine how you’d like to receive your funds based on your needs and objectives. You can choose from:

A monthly payment to supplement income
A lump sum to receive all your available funds at once
A line of credit to withdraw cash as you need it

Then, instead of repaying the loan in monthly installments, you would repay the loan, the accrued fees, and interest when you no longer live in the home.

How to Qualify for Reverse Mortgages in Georgia

While reverse mortgages are common loan types for Georgia homeowners, they can be tricky to qualify for. The basic requirements include:

Be at least 62 years old
Own substantial equity in their home
Live in the property as their primary residence
Attend a HUD-approved counseling session
Maintain FHA property standards
Stay current on outstanding financial obligations

Georgia Reverse Mortgages: Common Questions

Before committing to reverse mortgages on a Georgia home, it’s crucial to have answers to some of the most commonly asked questions.

Do I have to make monthly payments on Georgia reverse mortgages?

Borrowers can choose to submit monthly loan payments, but repayment is not required until the borrower either moves out of the home or dies.

How are interest rates determined for reverse mortgages in Georgia?

Interest rates on a Georgia reverse mortgage may be fixed or variable. The total interest rate is calculated by adding the interest rate index plus a margin set by the lender during the application process. For example, a loan with a total interest rate of 5.10% is calculated using a margin of 3.00% and an interest rate index of 2.10%.

How are Georgia reverse mortgages calculated?

The value of a reverse mortgage loan is determined by three factors:

The age of the youngest borrower
The appraised property value
The current interest rates

Will I be taxed on my reverse mortgage funds?

Reverse mortgage loan funds are not usually subject to income tax, but contact your tax advisor to be sure.

Can I use reverse mortgages in Georgia to buy a new home?

Yes, qualified borrowers can use their reverse mortgage loan proceeds to buy a new home. However, keep in mind that the loan repayment is due when the borrower no longer occupies the home as their primary residence.

While these are typical answers to these common questions, it’s always encouraged that you talk to a financial expert about how this information can vary based on your individual circumstances.

What If I Don’t Qualify for Reverse Mortgages in Georgia?

With such strict qualifications, it’s not uncommon to be rejected for reverse mortgages in Georgia. However, don’t be discouraged. There are plenty of other financial solutions available that could be a better fit for you than a reverse mortgage in Georgia. Let’s take a closer look at some of those options.

Home Equity Loan

A home equity loan, or a second mortgage, helps you convert your home equity into cash. Your home’s equity refers to how much of your house you actually own. The loan amount is determined by the amount of equity you have in your house. It’s the difference between the current value of your house and what you still owe on your loan balance to your mortgage lender.

If you’re approaching retirement but are struggling to qualify for a reverse mortgage, a home equity loan may be the right choice for you.

Cash Out Refinance

A cash-out refinance allows you to pay off your current mortgage with a new home loan that is worth more than the remainder of your mortgage. Homeowners will typically choose to refinance a mortgage for several reasons, including the following:

Lower rates/payments
Shorter loan term
Different interest type
Using equity

The process follows a similar path to taking out a regular mortgage. You would compare rates and terms from various lenders and compare them to your existing mortgage to ensure refinancing would benefit you. If it does, and you meet the lender’s requirements, you fill out an application and submit the necessary paperwork. If you’re approved, you will close on the refinance and pay the closing costs. It’s important to be aware of any and all costs and fees that can come from this type of transaction. Before choosing to refinance, take a look at 6 cases where refinancing makes sense.

A Sale-Leaseback

If reverse mortgages in Georgia don’t make sense for your needs, another alternative solution could be a sale-leaseback. A solution like this allows you to sell your house to a third party. You receive the equity in cash to do what you choose. However, instead of moving out and relocating to a new home, you can stay in the home as a renter for as long as you need. Since you no longer own the house, you do not need to pay a monthly mortgage, homeowner’s insurance, HOAs, or property taxes. You just pay a set monthly rent.

Key Takeaways

If you’re a homeowner in Georgia that is nearing retirement, you may be looking for ways to ensure your financial security. While getting reverse mortgages in Georgia can be challenging, there are plenty of alternative solutions available to you. Talk to a financial advisor to learn more about what could work for your circumstances.

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