- Additional tax-free income can be used for any purpose
- Choose to use a portion or all of your home equity
- Pays down / eliminates existing mortgage
- Retain your home ownership, pass down your home & remaining equity
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What is a Reverse Mortgage?
A reverse mortgage is just how it sounds. Instead of making mortgage payments, you can receive them. Or choose to receive your reverse mortgage as a lump sum or line of credit; or a combination of any of those. A reverse mortgage converts the equity in your home into tax free cash.
With a reverse mortgage you maintain the title of your home and you are not selling the home or taking on another mortgage.
You can use the proceeds for a reverse mortgage for anything you'd like. For instance:
- Supplement your retirement income
- Day to day living expenses
- Home improvements or repairs
- Medical Costs
- Pay off Debts
- Prevent Foreclosure or Cover Property Taxes
- Go on Vacation
- Buy a New Car
Who is Eligible for a Reverse Mortgage?
To be eligible for a reverse mortgage you must own your home, and the youngest borrower must be 62 or older. Eligible property types consist of:
- Single family homes
- 2-4 unit properties
- Condominiums (Condos)
- Townhouses
I'm Still Not Convinced, Tell Me More about a Reverse Mortgage!
In many cases, once you fully understand the facts about a reverse mortgage you are comfortable applying for one. Like most seniors, you've worked hard to build up the equity in your home and as you age could benefit and even enjoy the proceeds you can receive from that equity. But as with any loan, you should consider your options and cost of borrowing. It is actually not only encouraged, but required for you to speak with a counselor prior to taking out a reverse mortgage.
Frequently Asked Questions
I've Heard Negative Things about Reverse Mortgages
Much of what people construe as negative regarding reverse mortgages is actually false. Contrary to what many believe, when you take out a reverse mortgage you retain the title (ownership) to your home. At no point does the lender own the home.
Can I keep my Government Assistance / Benefits?
When you take out a reverse mortgage loan you keep your social security benefits and Medicare. However, if you are on Medicaid you must check with your local social services department. Usually an individual cannot maintain more than $2,000 in liquid assets or a couple cannot contain $3,000 or more while receiving Medicaid. Therefore, if you take out your reverse mortgage as a lump sum and use the entire balance in the same calendar month you can maintain your Medicaid.
How is a Reverse Mortgage Loan Repaid?
A reverse mortgage loan is structured so that the amount you owe never exceeds the value of your home. You are not required to repay the loan until you or the last remaining co-borrower vacates the property. At that point, you or your children have to pay back the loan using your own monies or by selling the house. Once the loan is repaid any remaining proceeds go to you or your estate.
What Are the Costs of Taking Out a Reverse Mortgage?
Since the loan fees can be paid out of the loan proceeds in most cases, you only have to pay for the appraisal which amounts to roughly $350.
