What is a reverse mortgage?
A reverse mortgage is a loan that is available to seniors over the age of 62 which allows them to convert home equity into cash. Unlike traditional home loans, a borrower does not make payments on a reverse mortgage. The loan does not need to be paid until they no longer use the home as their primary residence. A reverse mortgage can also be used to purchase a home.
How can I qualify for a reverse mortgage?
To qualify for a reverse mortgage, a borrower must be at least 62 years old, own a home, and have equity built in that home. A lender will also assess the financial strength of the borrower to ensure they can continue paying property taxes, homeowner’s insurance, and Home Owner’s Association Fees.
Will my home qualify for a reverse mortgage?
Single-family homes, 2-4 unit properties (one unit occupied by owner), FHA-approved manufactured homes, HUD approved condominiums, and townhomes are all eligible for a reverse mortgage.
How can I spend the money I receive from a reverse mortgage?
You can use the money from a reverse mortgage however you like, there are no restrictions. Many seniors use the money for unexpected medical care, in-home care, daily living expenses, groceries, medications, home improvements, existing debt repayment, property taxes, and more.
How much money can I get from a reverse mortgage?
The amount will vary borrower to borrower and is based on the age of the youngest borrower, current interest rates, value of your home, and how much you may owe on an existing mortgage.
What are my payment options for a reverse mortgage?
You can choose to receive the proceeds from a reverse mortgage in either a lump sum, monthly payments, or a combination of the two.
-Single disbursement lump sum payment
-Line of Credit
-Term – equal monthly payments for a set number of months
-Tenure – equal monthly payments as long as one borrower occupies the property
-Modified Tenure – line of credit and tenure combination
-Modified Term – line of credit and term combination
When do I have to repay the loan?
If you are occupying the home as your primary residence and your obligations are met, the loan does not have to be repaid. If you move or sell the property, the loan will need to be paid at that time. If the home is never sold, the loan will become due when the last borrower passes away.
What obligations do I have for a reverse mortgage?
You must occupy the property as your principle residence. You must also pay all property-related expenses including property taxes, utilities, HOA fees, homeowner’s insurance, and other applicable insurances. Lastly, the condition of the property must be kept at or above the same quality as when the loan was taken out.
What if I cannot meet these obligations?
If you do not meet these obligations, the loan could be put in default. At that point the mortgage company can require full payment of the mortgage balance and could even foreclose and sell your home.
Can I still leave my home to my heirs if I take out a reverse mortgage?
Yes. Your heirs must pay the reverse mortgage debt which will be the lesser of the mortgage balance or 95% of the current appraised value of the home. No debt is passed along to your heirs.