What is a Reverse Mortgage?
Reverse Mortgages are helping older Americans across the country achieve greater financial security. It is a safe and easy way for seniors to turn their home's equity into an additional source of income to meet any financial need.
By converting equity into income, a reverse mortgage is a way to stay in your home and receive cash to use for any purpose- whether it's day to day living expenses, home remodeling or repair, paying off existing debt, earning a college degree, or traveling the world. Unlike traditional home equity loans, this product does not require repayment of any kind until the home is sold or the borrower permanently leaves their residence. You retain the title and you remain living in your home.
Basically, having a Reverse Mortgage means that you get paid in cash every month, and you never have to pay back a penny of it until the house has sold. The amount paid every month depends on two things: your age and the value of your home. You will receive a set amount of money the whole time you still live in the same house. Most reverse mortgages are backed by the United States Government to ensure that you will receive payments for the whole time you reside in that house. Again, while you are living in the same house, you will never have to pay a penny and the money you are paid can be used for anything you'd like.
How do I qualify for a Reverse Mortgage?
Qualifying for a reverse mortgage is simple. Borrowers need to be at least 62 years of age, own their own home, have a minimal mortgage, if any, and occupy the property as their primary residence. In addition, there are no income, credit or medical qualifications necessary to be eligible for this loan. The size of the reverse mortgage granted depends upon the applicant's age, the type of reverse mortgage sought, the home's value, and interest rates.
Proceeds are paid in any combination of the following:
- Lump sum.
- Monthly payments for the life of the loan.
- Term payments for a specific period of time.
- Line of credit, with growth (not available in TX.)
- Combination of monthly payment and line of credit (not available in TX.)
Reverse mortgage borrowers may use the proceeds for whatever they wish, including:
- Paying off debts, including mortgage and credit cards.
- Make home repairs.
- Pay for home health care.
- Additional retirement investments.
- Travel.
- Long-term health insurance.
- Pay for college tuitions.
Common Reverse Mortgage Myths
Reverse Mortgages are only for desperate seniors who are "House Rich, Cash Poor".
- Incorrect. The reverse mortgage is an excellent financial planning tool that is used by homeowners of all walks of life to enhance their retirement years. While some have needed a reverse mortgage more than others, the growing popularity of this product is evidence of its benefit in a wide array of financial circumstances.
Your home must be debt free to qualify for a reverse mortgage.
- Incorrect. Even seniors with an outstanding first mortgage or other debt on their home may qualify for a reverse mortgage. However, the proceeds of the reverse mortgage must first be used to pay off this debt.
The bank owns the home after you get a reverse mortgage.
- Incorrect. You own your home and retain title throughout the duration of the mortgage. Once you permanently move out of your home or pass it to your estate, the loan must be repaid.
When a reverse mortgage comes due, the bank sells the home.
- Incorrect. When the loan must be repaid, you or your heirs can either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage.
I will need to make monthly payments on the Reverse Mortgage.
- Incorrect. The homeowner is only responsible for paying the taxes, insurance and upkeep of the home. As long as the home is your primary residence you will never have to make a payment.