Unfortunately there are a lot of misconceptions regarding reverse mortgages. It actually is a great product that can help many. I have found that people above age 62 have spent a lifetime paying in to their investment / their home and just are not able to make it month to month on there SS and / or fixed income. To date, reverse mortgages have helped many, either rid there current mortgage and there monthly payment affording them a more comfortable living, or supplement there income by opting to take monthly installments made available by their reverse mortgage. Others have opted to take a line of credit or lump sum and enjoy retirement by traveling or buying vacation homes.
What is a reverse mortgage?
- It's a special type of loan that enables individuals who are 62 years or older to convert some of their home's equity into tax-free* funds
- Unlike traditional equity loans, you receive payments instead of making them
Who is eligible?
- Homeowner(s) who are at least 62 years of age and occupy the property as their principal residence
- Eligible properties include single-family homes, condominiums and townhomes, or a 2 - to - 4 unit dwelling
- The home must be owned free and clear or have a small remaining balance that can be paid off with the reverse mortgage
- No income, employment or credit requirements are needed to qualify**
How much can someone borrow?
- The amount that can be borrowed is based on a HUD formula that factors in the age of the youngest homeowner, the interest rate, the lesser of the appraised value and the FHA lending limit, and the amount of any existing liens on the home
What are some of the benefits?
- The reverse mortgage customer retains ownership and lives in their home
- Cash advances can be used for any purpose
- Loan proceeds are not considered income and will not affect Social Security or Medicare benefits. However, your monthly reverse mortgage payments may affect your eligibility for some other programs, such as Medicaid, as it is based on if there is a need for the program.
What type of interest rate options are there?
- Reverse mortgages are available with either a fixed or variable interest rate
- Any adjustment in a variable rate mortgage has no effect on the amount or the number of loan advances you can receive, but causes the loan balance to grow at a faster or slower rate
What are the tax-free funds* options?
- Lump sum advances makes funds immediately available
- Tenure plans provide fixed, monthly loan proceeds
- Line of credit makes funds available upon request
- You can do a combination of the above three funding options
What are the costs involved with a reverse mortgage?
- There are closing costs, which can be financed into the loan. These may include origination fee, title insurance, appraisal, a mortgage insurance premium and attorney fees
- Typically, there are no out-of-pocket expenses, with the exception of speaking to a reverse loan counselor prior to funding
- The customer is expected to continue maintaining the property, paying the real estate taxes and homeowners insurance premiums
How is the loan repaid?
- The balance due can come from home sale proceeds, or from other resources such as savings, insurance, or possibly applying for a new mortgage. There is no requirements that the home to be sold, only that the loan be repaid.
Are there restrictions on how I can use my reverse mortgage proceeds?
- Absolutely not! It's your money to use as you see fit.
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