A reverse mortgage, also known as a HECM (Home Equity Conversion Mortgage) is a financial tool that was created specifically for homeowners 62 or older to allow them to:
- pay off their current mortgage (if they have one) and use any remaining tax-free cash for anything
- gain relief from the stress of monthly bills or increased medical expenses
- allow them to afford and continue to own their own home
- live more comfortably with no monthly mortgage payments
- gain financial flexibility
Unlike traditional “forward” home loans or second mortgages, there are currently no income or credit requirements. The only requirements are that the home must be your primary residence, you must be at least 62 years old, and you must have sufficient equity in your home.
Who can get a reverse mortgage?
Any homeowner over the age of 62 can apply for a reverse mortgage. As the borrower, you must occupy the home as your primary residence.
How do reverse mortgages work?
The application process is the same as any other loan. Your current loan (if you have one) will be paid off with your new reverse mortgage, totally eliminating any current mortgage payment you have! If you have additional equity, you can access that money – tax-free! If your home is paid off, you can use a reverse mortgage to gain access to the equity that you have worked so hard to build. As the homeowner(s), you can choose from one of four ways to receive the additional cash from your reverse mortgage:
- As a monthly payment
- In one lump sum amount
- As a line of credit
- Any combination of the above options.
Since reverse mortgages allow you to make no monthly payments, the mortgage amount you owe grows larger over time. As your mortgage increases, the amount of equity you have left after selling or paying off the loan generally grows smaller. The amount owed at the conclusion of a reverse mortgage (when you no longer occupy the home) is either the amount of the home’s value or the amount of the current mortgage – whichever amount is less. Also, your home will continue to appreciate just the same as if you had a regular mortgage, increasing your equity as time progresses.
As a Reverse Mortgage borrower, you will retain your place on the property’s title and continue to own your home. You will still be responsible for property taxes, insurance and repairs. No repayment is required until you no longer occupy the house.
What could you do if your mortgage payment was eliminated, or if you had additional cash? Whether you just want to have more money to enjoy your life, help support a loved one or pay off other rising bills and medical expenses, a reverse mortgage can give you immediate access to your money. Talk to a Reverse Mortgage Expert today to learn more about how a reverse mortgage could help you.
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Reverse mortgages are Government Insured and Approved by the Department of Housing & Urban Development (HUD)
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