What is a Reverse Mortgage?
Its official name is a Home Equity Conversion Mortgage (HECM), a loan that in most cases is insured by the Federal Housing Administration (FHA) for homeowners age 62+ (or age 55+ for a non-FHA reverse mortgage). It allows borrowers to access a portion of their home’s equity to get income tax free cash to use as they wish – no monthly mortgage payments are required. The borrowers retain ownership and title to their home as long as they: live in the home as their primary residence; Continue to pay required property taxes and homeowners insurance; Maintain the home according.
NOTE: Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits. Property taxes, homeowners insurance, HOA dues, and home maintenance are required to be paid by the borrowers.
What are the benefits and uses of a reverse mortgage?
From eliminating your monthly mortgage payment to paying for unexpected expenses, a reverse mortgage can help provide financial flexibility and relieve many of the financial pressures you face in retirement. A HECM can allow you to: Pay off an existing mortgage, monthly bills, or healthcare expenses to increase cash flow; make needed home repairs or modifications to live more comfortably;
replace taxable withdrawals from 401(k) or other retirement plans with tax-free reverse mortgage proceeds; establish a line of credit for emergencies or occasional expenses. help a child or grandchild with major expenses, like a down payment on a home or college tuition.
NOTE: Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.
What are some common misconceptions about Reverse Mortgages?
MYTH: The bank will own my home. FACT: You keep the title to your house. MYTH: My heirs won’t inherit anything. FACT: Your estate only owes the balance on the reverse mortgage, any remaining equity will go to your heirs. MYTH: I could get forced out of my home. FACT: FHA/HUD reverse mortgage specifically state that as long as you comply with the terms of the loan you cannot be force out of your home.
How much do I qualify for?
The amount you qualify for is dependent on several factors, including
your age; current interest rates; your home’s value; the reverse mortgage product you choose. NOTE: Consulting an experienced loan officer is the best way to get more concrete numbers that reflect your current situation.
What happens at the end of the loan?
Typically a reverse mortgage ends when you no longer use the home as your primary residence, such as selling the home or the last borrower passes away. When this occurs the loan balance must be repaid.
What are my heir’s options to pay the loan balance?
Sell the home and pay the balance of the reverse mortgage—heirs retain remaining equity. Estate can buy back the home at 95% of the appraised value even if the home is “upside down”. Deed in Lieu – servicer takes responsibility for the home.
NOTE: Since this is a non-recourse loan the estate will never owe more than the home is worth.
How will I receive my cash?
You can receive a lump payment, set up monthly disbursements, establish a line of credit to access available funds as needed, or a combination of the options above.
NOTE: A line of credit is only available on adjustable rate products.