A Reverse Mortgage is just like any other type of mortgage. There is one exception, however: you don’t have to make a principal & interest payment (property tax, insurance payments and applicable HOA fees are still necessary). See, a Reverse Mortgage serves as a loan for a senior-aged homeowner by using part of the home equity as collateral. What this means is that the loan comes due when the borrower moves out permanently, sells the home, passes away, or does not fulfill their financial obligations. When the homeowner moves or passes, the proceeds of the home sale go to the lender to repay the mortgage balance. Any proceeds beyond the loan balance go to the homeowner (or the estate if passed). In some instances, heirs may elect to pay off the loan so they can retain the family home. In the event the homeowner does not fulfill their financial obligations in accordance to program guidelines, they are still at risk of foreclosure proceedings.
Reverse Mortgage
What is a Reverse Mortgage?
Who is eligible for a Reverse Mortgage?
In order to be eligible for a Reverse Mortgage, the applicant must be 62 years or older, own the property, and occupy it as their primary residence. In addition, they must maintain the home with needed repairs, property taxes and insurance. Also, the property does need to meet certain FHA property standards. Finally, the applicant must participate in a reverse mortgage counseling session (this can be done over the phone or in-person.)
Features
Better than selling:
In addition to the incredible time and effort, selling your home eliminates one of your largest and most secure investments. On top of that, moving can be emotionally and physically exhausting. Then you may have to pay rent or make another monthly payment that takes away from your lifetime savings.
Greater fund flexibility:
A Reverse Mortgage can give you the ability to use your home equity while actually living in your own home. You can use the tax-free proceeds in a number of ways, including taking your proceeds as a line of credit, monthly advances for a set period of time, a monthly stream of funds for as long as you live in your home, a lump sum, or a combination of these options.
No monthly P&I payments:
If you qualify and have an existing mortgage, home equity loan or any other type of debt, you can pay it off and reduce your monthly expenses. And if you own your home, you can access additional funds you may need, also with no monthly principal and interest mortgage payments (property tax and insurance payments and applicable HOA fees are still necessary).
Who is eligible for a Reverse Mortgage?
In order to be eligible for a Reverse Mortgage, the applicant must be 62 years or older, own the property, and occupy it as their primary residence. In addition, they must maintain the home with needed repairs, property taxes and insurance. Also, the property does need to meet certain FHA property standards. Finally, the applicant must participate in a reverse mortgage counseling session (this can be done over the phone or in-person.)
