Know the Facts Regarding Reverse Mortgages

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What exactly is a reverse mortgage?

A reverse mortgage is a federally insured loan designed to convert the equity in your home into cash. While most mortgages require you to make a payment, a reverse mortgage makes payments to you! The greatest benefit of a reverse mortgage is that there are no payments due as long as you live in and maintain your home. Reverse mortgages are different than a typical home loan in the following ways:

Your income is not a factor in being approved
There are no monthly payments due
It raises your monthly income
You are protected against ever owing more than your home is worth
You can never lose your home as long as you maintain the property and keep the taxes/insurance current

How are the funds distributed?

You can receive the funds from your home in one of the following ways:
In one lump sum
In a monthly payment plan
In a credit line that you can access when you need it
A combination of any of the above three options

Who qualifies for a reverse mortgage?

In most cases, reverse mortgages are available for those who fit the following criteria:

Are at least 62 years or older, including any co-owner of the home
The borrower(s) must own the home
The borrower(s) must use the home as their primary residence
The residence must be an owner occupied 1, 2, 3, or 4 unit residential building, but not a manufactured home

How much money can I get?

The amount you can get is determined by several factors including: your current age, current interest rate, balance on your current mortgage and the appraised value of your home. Typically, the older you are, more valuable your home is, lower the interest rate, and less you owe, the more money you can get.

Who owns my home if I get a reverse mortgage?

You, as the borrower, retain the title to your home. The reverse mortgage lender is simply extending you a loan. You remain responsible for taxes, insurance, utilities, maintenance, and any other expenses associated with home ownership.

Can I get a reverse mortgage if I current have a mortgage on my home?

Yes. As long as you have equity in your home, you can still take out a reverse mortgage. The funds from your reverse mortgage will first go to paying off your existing mortgage(s).

How can I use the money?

The funds you receive from a reverse mortgage may be used for anything you choose! Whether you want to supplement your retirement income, consolidate debt or maintain emergency cash reverses, you have the freedom to decide.

Could I ever owe more than my home is worth?

No, you will never owe more than your home is worth. Because a reverse mortgage is a “non-recourse” loan, the lender can only use the home as collateral for the loan. They cannot seek repayment from your income, assets or estate.

When does the loan have to be paid back?

The following are common circumstances that require a reverse mortgage loan to be paid back to the lender:

If you sell your home
The surviving borrower passes away
The surviving borrower fails to occupy the home as their primary residence
The borrower(s) fail to keep their homeowner’s insurance and taxes current
You sub-let your home
An additional owner is added to the title of the home
An additional loan is taken out against your home

The borrower or heirs may choose to pay back the loan by selling the home or refinancing the reverse mortgage. The remaining equity in the home is then passed on to the heirs.

A reverse mortgage can be a valuable tool in planning your retirement. Contact your loan officer today for more information.