Reverse Mortgages | How They Work

Mortgage and Lending with Redwood Financial Services

Are you looking for more information about reverse mortgages and how they work?  Look no further.  We will cover the basics of a reverse mortgage in this article.

GearsTalking about what is different about a reverse mortgage is the easiest way to explain how they work.  When compared to a "regular" mortgage, what are the advantages, disadvantages and quirks that you should know?

1. First and most important, there is almost no difference between a reverse mortgage and a normal loan.  The way you take title is the same.  You still own the home.  You can sell or refinance anytime you want without penalty.  What's more, you get to keep any remaining equity.  These features are all the same as any other mortgage you may have had.

2. The biggest difference is that you don't have to make any payments.  This is for as long as you live in the home as your primary residence.  The loan will have to be repaid upon your passing or when you move out, but while you live there, this loan is payment free.  The primary residence rule applies to all borrowers on the loan, so both you and your spouse must no longer live there for the loan to be required to be repaid.

3. Too many times, a senior is unable to live a full retirement without undue stress and worry, especially if they start feeling like they are going to outlive their savings.  Great news, if you have equity in your home you can change all that.  You can get a monthly income, a lump sum, a line of credit, or a combination of any of the three choices.  How you spend the money is up to you.

4. You will not affect the social security benefits, and the money received is not taxable, when you get a reverse mortgage.   If you are relying on Medicaid, you will need some specific counseling.  There are some things you will need to look for to make sure you don't disqualify yourself from Medicaid benefits.

Recapping, you will see the advantage is you can take some of your home equity and greatly enhance your retirement.  The disadvantage, if you want to call it that, is you will spend some of your home's equity.  If you are on a government assistance program like Medicaid, your quirk is that you need to not have too much in your bank accounts, or you could be disqualified from said assistance programs.

There are severse different reverse mortgage programs available so if you would like to have one of our reverse mortgage specialists, give us a call, we can even come to your home if you prefer.  You can reach us locally at (541) 330-2198.  If you need a toll free number call us at (877)339-6633.  Alternatively, you can get additional reverse mortgage information on our website.  try our free Reverse Mortgage Calculator to see what you qualify for.

Nancy Timberlake
RE/MAX Shoreline - Portland, ME
REALTOR - Southern Maine

Thanks for this interesting post.  I think this will be helpful to share with clients who are considering this option.

Sep 02, 2010 05:32 AM
David Prulhiere
Redwood Financial Services - Grants Pass, OR

oops!  I missed the typo.  Last paragraph should have been "several" - not "severse".  :)

It is helpful Nancy.  Purchasing a home with a reverse mortgage is also a great option.  I will put a post on this this week.

Sep 02, 2010 05:45 AM