A Few Highlights of a Reverse Mortgage

• Must own the home and meet the age requirement.
• Do not have to qualify on income or personal credit.
• Homeowner still retains full control of the property.
• There are no monthly loan payments.
• Can choose method of receiving funds.  (Lump sum payment, monthly payments, line of credit which can be drawn at will or a combination of these method payments).
• The money can help with medical expenses, house repairs, travel, or other living expenses

 

What is a Reverse Mortgage?

A reverse mortgage is a unique type of loan for senior citizens who are at least 62 years of age or older to convert the equity in their home into tax-free income.  With a reverse mortgage there are no payments like that of a traditional mortgage.  In fact, the lender makes payments to the homeowner according to the payment plan they choose.

Regardless of how the loan is paid, the borrower typically does not have to pay anything back until the last living borrower vacates or sells their residence.  The cash they get from a reverse mortgage is tax-free and can be paid to them in several ways. 

• A single lump sum payment
• Regular monthly payments
• Line of credit which can be drawn at will
• Combination of all three

 

Because the borrower makes no monthly payments, the amount they owe grows larger over time. As their debt grows larger, the amount of cash they would have left after selling and paying off the loan (their "equity") generally grows smaller. But the borrower can never owe more than their home's value at the time the loan is repaid.

Reverse mortgage borrower continues to own their own home, so they are still responsible for property taxes, insurance and repairs.  If the borrower fails to carry out these responsibilities, the loan could become due and payable in full.

For many seniors, these mortgages can provide answers to some critical retirement issues by providing income at a time when they need it most.