I like to research loan programs and scenarios I am not familiar with.  One of those programs happens to be Reverse Mortgages.  For those of you that do not know, Reverse Mortgages sometimes carry a very negative connotation with them. 

What is a Reverse Mortgage?

A reverse mortgage enables homeowners aged 62 and over to convert part of their home equity into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is reversed. Instead of making monthly payments to your Mortgage Bank, as with a regular mortgage, your Mortgage Bank makes payments to the you.

Types of Reverse Mortgages:

• Single-purpose: Offered by some state and local government agencies and nonprofit organizations.
• Federally-insured: Backed by HUD and known as Home Equity Conversion Mortgages (HECMs).
• Proprietary: Private loans that are backed by the lenders that develop them (SimpleEquity).

Key Features of a Reverse Mortgage

• All borrowers on title must be at least 62 years of age.
• Property must be the borrower's primary residence.
• No income requirements and no monthly mortgage payments.
• The loan accrues interest as long as borrowers live in the house. Borrowers make no payments on the loan, but are obligated to pay taxes and insurance (T&I).
• Borrowers can take funds in a line of credit (LOC) or a fixed monthly payment.
  • 70% of borrowers take the LOC and 50% of those take all available funds at closing.
  • 65% of borrowers pay off an existing mortgage.
• Note rates are based on an index plus a margin.
• Loan is due and repaid upon permanent move out of borrower. This includes any of the following:
  • Sale of property
  • Consecutive period of twelve months away from residence
  • Death
• Principal, interest and service fees are repaid upon loan maturity.
• Loan is non-recourse; borrower or heirs can never owe more than the appraised market value at time of repayment.

There are two types of Reverse Mortgages, the Line of Credit (LOC) and the traditional Reverse Mortgage.  The LOC allows you to draw money when you choose to.  The standard Reverse Mortgage pays monthly based on the set up of the original loan.

Is It a Good Loan?

As with ANY loan program, if the borrower can benefit from the loan, it is a terrific product.  If you are on a fixed income and paying $700 per month for your mortgage, that can take a big dent.  If you set up a reverse mortgage, you can not only eliminate your monthly mortgage payment but also get a monthly payment from the bank to you!  You can see how that would benefit a lot of 62+ homeowners.

This Sounds Right for My Scenario, Now What?

The most important thing to do is to contact a REVERSE MORTGAGE SPECIALIST.  Do not just contact the first name you see in the phone book.  The Mortgage Professional that you contact should be specially trained and have experience writing these mortgages. 

If you have any questions or need the recommendation of a good Reverse Mortgage Specialist in your area, please feel free to contact me directly.

Your Mortgage Partner for Life,

Rey Gallegos
Mortgage Loan Officer

Serving Las Vegas, North Las Vegas, and Henderson, Nevada.