Reverse Mortgage Overview
A Reverse Mortgage is a loan that enables older homeowners to convert a portion of their home equity into cash. It may also provide a way for those with limited income to better manage their retirement finances by allowing them to use accumulated equity to cover living expenses.
With the reverse mortgage, as long as you live in the home, you’re not required to make monthly mortgage payments.* Instead, the lender makes monthly payments to you. That’s why it’s known as a reverse loan because with a traditional mortgage it’s the other way around, the borrower pays the lender. In this case, the borrower is not required to pay back the reverse loan until the home is sold, vacated, or the owner passes away; and the homeowner still retains ownership of the home. However, you must remain current on property taxes, hazard insurance, homeowner’s association dues, any other applicable fees, and you must be able to maintain the property.
*Borrower must pay required taxes, insurance, or HOA if applicable.
Reverse Mortgage Benefits
No FICO qualification
No debt-to-income ratios - though borrowers must demonstrate a willingness and capacity to pay basic obligations
Provides greater freedom in retirement - you aren’t restricted on how you can use the loan proceeds and it is non-taxable income
No debt is assigned to your heirs when the loan becomes due. Instead, the family is given a period of time to pay off the loan or sell the home.
A reverse purchase can help a borrower retain their savings, improve their monthly cash flow, and / or finance a purchase that would normally be beyond their budget
It can help seniors relocate to a different region or to move closer to family
It can also help seniors move into a more affordable home that requires less maintenance, or better serves their physical needs by providing features like handrails, wider doors, or a single-story layout
Helps borrowers age in place
Reverse Mortgage Requirements
Borrowers must be 62 years of age or older
Borrowers must qualify to pay taxes, insurance, or HOA if applicable
You can own your home outright, or have a low balance on your mortgage that can be paid off at closing with proceeds from the reverse loan
The borrower also must have financial resources to pay ongoing property fees
Before obtaining this type of loan, all borrowers and non-borrowing spouses must receive independent counseling
Let me guide you on your path through your reverse mortgage! Give me a call today to learn more.