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Reverse Mortgages

 

What is a reverse mortgage?

A reverse mortgage is a home equity loan (used for any purpose) where seniors, 62 and older, can access the equity (cash) built up in their home.

It is called a reverse mortgage because you borrow money from a lender, but the lender makes monthly payments to you, rather than you making monthly payments to the lender. You also have the option of receiving this income as a line of credit or a lump sum. Instead of paying back the mortgage while you live in the home, you actually pay it back in reverse, after you leave the home. 

What are some of the benefits of a reverse mortgage?

  • Strengthen your personal and financial independence.
  • Eliminate existing monthly mortgage payments
  • Help pay for health care or other needs.
  • You can never lose your home in foreclosure as long as you maintain the property tax and insurance payments.
  • The loan is only paid off when the house is sold by you or your heirs, or all borrowers move out of the house.
  • Keep your Medicare or Social Security benefits.
  • Use it as a credit line and draw upon it as needed.
  • Get all your cash right away.
  • Get the best of both—get cash now and have a balance in reserve to use as a credit line.
  • No Income Requirements: The homeowner does not need to be working and is not qualified based on income.
  • FHA/Government Insured program.
  • The proceeds of a Reverse Mortgage are tax-free*. 

Because this is a government insured loan, the closing costs are generally higher than a conventional mortgage because the closing costs include a government mortgage insurance premium called MIP. What the MIP does for you, the borrower, is quarantee that your money is safe and secure. FHA (the government) is insuring this loan and if anything happens to the Lender, you never need to fear loosing the monthly income you are receiving or the money that may be in your line of credit. It is fully insured by the government.

Also, the MIP insures you and your heirs against being left with a personal debt if your property value drops or for any reason you owe more than the home is worth at the time of sale. This is called a "Non-Recourse" loan. In a situation like this, the government would actually pay the Lender any difference if there was this shortfall. This is a huge benefit to you and your heirs. You can have piece of mind, knowing that no one will be left behind to pay a personal debt on your loan.

In summary, a non-recourse loan means that no matter how much you owe at the time the loan is paid off, you or your heirs can never owe more than the value of the home at that time. Of course, if there are proceeds left when the home is sold, that money goes to either you or your heirs. This is a very safe product for both senior homeowners and their families.