Reverse Mortgages

A reverse mortgage is a type of home loan that lets you convert a portion of the equity in your home into cash. Unlike a traditional home equity loan or second mortgages, borrowers do not have to repay the loan until they pass away or until they no longer use the home as their principal residence To be eligible for a Reverse Mortgage, you must be 62 years of age or older, own your home outright, and have the financial resources to pay ongoing property charges including taxes and insurance, and you must live in the home. You are also required to receive consumer information from a HECM counselor prior to obtaining the loan. The advantage of a Reverse Mortgage is that it permits Elders who are “Property Rich” but “Cash-Poor” to use their housing equity to receive cash for the equity in their home. The loans do not have to be repaid until the last surviving borrower dies, sells the home or permanently moves out. The homeowner receives a sum of money from the lender, based largely on the value of the house, the age of the borrower, and current interest rates, up to a maximum of $625,000.

Homeowners can get the money in a lump sum, as a line of credit, in a series of regular payments, or a combination of the three options. There are several disadvantages of Reverse Mortgages, including:

There are usually high fees and closing costs associated with the loan, which are added to the principal balance.

You owe more over time. Each month Interest is added to the balance that you owe.

Interest rates may increase over time.

Interest is not tax deductible each year.

You have to pay other costs related to your home, including property taxes, insurance, utilities, fuel, maintenance, and other expenses.

You have less to leave to your heirs. Reverse Mortgages can quickly use up the equity in your home, which means fewer assets for your heirs.

If you have any family members living in the home when you pass away who are not on the loan, those family members may be forced to sell the home to re-pay the reverse mortgage. You should speak to an experienced mortgage professional for questions concerning Reverse Mortgages.

You can email your questions to [email protected].