What is a Reverse Mortgage?
A reverse mortgage is a loan secured by the home of a person(s) over the age of 62. But, instead of you making payments, this loan pays you. It allows you to convert the equity in your home into tax free income. You never make a payment as long as you live in the property.
- The home can have an existing mortgage, which will be paid off by the proceeds of the new reverse mortgage.
- The proceeds of the loan can be used for any purpose.
- The loan only comes due when the last borrower (s) permanently leaves the home
- 90% of all Reverse Mortgages are Federal Government insured loans and follow government guidelines.
- The senior always remains the owner of the property
What is the Difference Between a Reverse Mortgage and a Traditional Mortgage?
On a traditional mortgage, when you borrow money , you make monthly payments – and, you must qualify for the loan with sufficient income and good credit in order to get the best interest rate and terms. Though we ask you about income and we do run a credit report, your approval is based on the equity you have in your home. Your rate is the same regardless of your income or credit.
With a reverse mortgage, you receive money in monthly payments, a lump sum, a line of credit or combination of payment methods. There are no payments made on this loan until the borrower (s) are no longer living in the home. Income & credit are not considered for approval.
What are the Advantages & Benefits of a Reverse Mortgage?
Of the most important benefits of the reverse mortgage is the peace of mind it brings. By having access to money at any time, it allows people to maintain their financial independence and not have to rely on their children for help. It gives people choices of how to spend their money while they are living.
- Continue to live in your own home for as long as you live – have the income necessary in case you need caregiver assistance
- You retain ownership and control, – ownership is never given up to the lender.
- Enjoy TAX FREE INCOME*
- You decide how to take your money. You may receive a lifetime monthly income, a lump sum, or a line of credit, or a combination of all three. Changes can be made at any time
- The unused portion of the line of credit grows over time to provide additional funds
- Senior borrower and the heirs have no personal liability for the repayment of the loan – only the home can stand for the debt (non-recourse).
- The loan proceeds can be used any way, there are no restrictions.
- Loan can be repaid at any time without penalty
Reverse Mortgage Eligibility Requirements
- All homeowners must be 62 or older and occupy the property as their principal residence. The older you are, the more money you can borrow
- The home must have sufficient equity – if there is an existing mortgage balance, it must be paid off by the reverse mortgage.
- The property must be one of the following: single family, condo, town home, 2-4 unit, PUD, or a manufactured home (on a permanent foundation and built after 1976).
How Much Can Be Borrowed? The following are the factors affecting loan amount:
- The age of the youngest borrower – the older a borrower, the more money they get.
- The appraised value of the home.
- The current interest rate – the lower the rate the greater the loan amount.
- The county in which the property is located affects the maximum loan limit
What Kinds of Reverse Mortgages are Available?
1. HECM – Home Equity Conversion Mortgage. This is the FHA, federally insured Reverse Mortgage Program. More than 90% of all reverse mortgages are HECM loans. This loan has better rates and terms than other reverse programs and usually provides more borrowing power for properties worth less than $700,000. Payments to the borrower are insured by the Federal Government.
2. Proprietary Reverse Mortgages – These loans are designed for higher priced properties with values above $1,500,000.
We always provide professional guidance in helping you choose the right program.
*it is suggested that you consult your benefits specialist, or financial advisor as Reverse Mortgage payments or proceeds may have an effect on your particular situation.