7 Things To Know About Reverse Mortgages
What is a Reverse Mortgage exactly?
A Reverse Mortgage is a unique type of loan that allows seniors to get cash out against their homes equity. Unlike second mortgages or home equity loans, no payment is required until after the borrower moves out, sells the home, or passes away.
How do I qualify for a Reverse Mortgage?
To be eligible for a reverse mortgage you must be a homeowner no younger than 62 years of age. Your mortgage must either be paid off in full or have a low remaining balance. Before moving forward with a Reverse Mortgage you are required to receive more information from a HUD-approved counseling service. You can contact the Housing Counseling Clearinghouse at 1-800-569-4287 to receive a list of HUD-approved counseling services as well as a list of FHA approved reverse mortgage lenders in your area.
How is a Reverse Mortgage different than a home equity loan?
With traditional home equity loans you are required to make monthly mortgage payments once you receive the loan. Reverse Mortgages don’t need to be repaid until the borrower passes away or permanently moves from the residence. A home equity loan balance will decrease over time and a Reverse Mortgage balance will increase over time.
Can I lose my home if I outlive my Reverse Mortgage loan?
No. You aren’t required to repay the loan so long as you or one of the borrowers lives in the house and keeps the taxes and insurance paid.
What are the pros to a Reverse Mortgage?
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A Reverse Mortgage allows you to live in your home while receiving payments.
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You don’t need to repay your loan until you have moved out of your home or passed away.
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A Reverse Mortgage can allow you to get cash out of your homes equity to increase your income and quality of life.
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Reverse Mortgage payments are tax-free.
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There are no restrictions on how you spend your money.
What are the cons to a Reverse Mortgage?
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Taking out a Reverse Mortgage will decrease the amount of equity you have in your home. Therefore, you heirs will inherit a smaller portion of your homes value.
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The upfront fees for brokerage services can be costly and significant.
How can I receive my money?
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Equal monthly payments
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You can take the money as you need it (line of credit)
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One lump sum
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A combination of all three previous options
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I learned all about this stuff when I went online to look up Reverse Mortgages. What they don’t tell you is how this will essentially impact your life as you move forward in reverse. What I gained from speaking with a real agent in Los Angeles was that you have to carefully select the payment types that you receive and work out what will affect your children. Even though we needed a Reverse Mortgage I couldn’t have found a better place to discuss my situation than with the Senior Lenders Reverse Mortgage. They talked about all the pitfalls and then went into the possibilities. i still call them to talk about life and retirement.