Reverse Mortgage

What is a Reverse Mortgage?

According To Wikipedia:

reverse mortgage is a loan available to seniors, and is used to release the home equity in the property as one lump sum, or multiple payments. The homeowner’s obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (e.g., into aged care).

In a conventional mortgage, the homeowner makes a monthly amortized payment to the lender; after each payment, the equity increases within his or her property, and typically after the end of the term (e.g., 30 years), the mortgage has been paid in full and the property is released from the lender.

In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, or a bulk payment of the available equity percentage for their age, then the debt on the property increases each month.

Reverse Mortgage Highlights:

  • Must be at least 62 years old.
  • House must be primary residence.
  • Mortgage must be either fully paid, or you must have a substantial amount equity.
  • Limited income qualification and liberal credit score requirements.
  • Payment can be a lump-sum, monthly cash payout, line of credit held in reserve, or combination of all three.
  • In many states, you can even purchase a home with a reverse mortgage!
Frequently Asked Questions

Q:  Can the lender take my home away if I out live the loan?

No. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. And because these are non-recource loans, you can give the property back to the bank without having to risk any of your other assets, or damaging your credit.

Q:  How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less.

Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

Q: Will I still have an estate that I can leave to my heirs?

In some cases yes, when you sell your home, leave your home, or “pass on” you or your estate will repay the cash you received from the reverse mortgage (plus interest and other fees) and any equity left over is yours or your heirs to keep.

If there is no equity left, you or your heirs can Deed to property to the bank and walk away without any further claim or obligation.