What Is A Reverse Mortgage?
A reverse mortgage allows you to borrow against the equity you’ve established in your home. To be eligible, you must be age 62 or older and own your home free and clear or have a remaining mortgage balance that can be paid off by the reverse mortgage. You’ll want to consult a tax advisor to confirm this, but in most cases a reverse mortgage gives you access to tax-free funds. Instead of making payments, you can choose to receive them. That’s the “reverse” part of a reverse mortgage.
Why Get A Reverse Mortgage?
There are no restrictions on how you may use proceeds received through a reverse mortgage. You can direct the funds toward a variety of purposes, including:
How Does It Differ From A Traditional Home Loan?
With a traditional mortgage or home equity loan, homeowners borrow a large amount of money and make monthly payments. They also need a sufficient debt to-income ratio to qualify and make monthly mortgage payments. A reverse mortgage pays you, and is available regardless of your current income or debt-to income ratio.
Three Important Facts
Making an educated decision begins with undoing common misconceptions that keep many senior homeowners from looking into the advantages of a reverse mortgage. Contrary to what you may have heard — as long as all property tax, insurance and maintenance requirements are met:
1. You cannot owe more than the value of your home.
2. You retain title to the property.
3. You receive payments instead of making them. Please ask your Consumer Equity Reverse Mortgage Expert for details about when repayment may be due.
As long as all program requirements are met, if an individual borrower is hospitalized, or wants to spend six months in Florida, she cannot be forced to move. If one reverse mortgage co-borrower moves to a nursing home or passes away, the other(s) cannot be forced to move.
Eligibility Requirements
Reverse mortgage eligibility requirements are quite simple. There are no income, employment or credit qualifying restrictions.
How Much Can Be Borrowed?
In most cases, maximum reverse mortgage loan amounts are based on the following factors:
In general, the older you are, the more your home is worth, and the lower the interest rate, the more you’ll be able to borrow. Ask your Consumer Equity Reverse Mortgage Expert for further details.
Payment Options
Reverse mortgage customers have differing needs. Some would rather receive their entire loan amount up front, while others prefer a steady monthly stream of funds to supplement their other income. Regardless of how you choose to receive your proceeds, you can adjust your plan as often as you wish to accommodate changing needs.
Reverse mortgage funds-distribution plan options include:
Interest Rate
Reverse mortgages are variable-rate loans. In most cases, you may choose monthly or annual adjustments. Interest rate adjustments have no effect on the number of loan advances you can receive, but they do cause your loan balance to grow at a faster or slower pace. Fixed rates are now also available.
Repayment of Reverse Mortgage
Please ask your Consumer Equity Reverse Mortgage Expert for details about when repayment may be due. The balance due can come from home sale proceeds, or from other resources, such as savings, insurance or possibly applying for a new mortgage. There is no requirement that the home be sold, only that the loan be repaid.
Possible Effects On Other Benefits
Reverse mortgage loan proceeds are not considered income and will not affect Social Security or Medicare benefits. However, receiving monthly reverse mortgage advances could affect your eligibility for some public assistance programs that are based on need. Consult a local attorney to determine how — or if — a reverse mortgage funds-distribution plan might apply to your specific situation.
Why Get A Reverse Mortgage?
There are no restrictions on how you may use proceeds received through a reverse mortgage. You can direct the funds toward a variety of purposes, including:
- Reducing high-interest debt
- Supplementing retirement income
- Remodeling or repairing your home
- Paying property taxes
- Covering healthcare expenses
- Planning for long-term care needs
- Growing your investment portfolio
- You can even use your reverse mortgage funds to purchase a second or vacation home.
- Most Important, paying for everyday expenses and making ends meet!
How Does It Differ From A Traditional Home Loan?
With a traditional mortgage or home equity loan, homeowners borrow a large amount of money and make monthly payments. They also need a sufficient debt to-income ratio to qualify and make monthly mortgage payments. A reverse mortgage pays you, and is available regardless of your current income or debt-to income ratio.
Three Important Facts
Making an educated decision begins with undoing common misconceptions that keep many senior homeowners from looking into the advantages of a reverse mortgage. Contrary to what you may have heard — as long as all property tax, insurance and maintenance requirements are met:
1. You cannot owe more than the value of your home.
2. You retain title to the property.
3. You receive payments instead of making them. Please ask your Consumer Equity Reverse Mortgage Expert for details about when repayment may be due.
As long as all program requirements are met, if an individual borrower is hospitalized, or wants to spend six months in Florida, she cannot be forced to move. If one reverse mortgage co-borrower moves to a nursing home or passes away, the other(s) cannot be forced to move.
Eligibility Requirements
Reverse mortgage eligibility requirements are quite simple. There are no income, employment or credit qualifying restrictions.
- All homeowners must be age 62 or older and occupy the property as their principal residence.
- The home must be owned free and clear or have a remaining mortgage balance that can be paid off by the reverse mortgage.
- The property must be a single-family or a one-to-four unit, owner-occupied dwelling.
- Townhomes, detached homes, condominium units, planned unit developments (PUDs) and some manufactured homes are eligible.
- The home must meet Department of Housing and Urban Development (HUD) minimum property standards. In some cases, home repairs can be made after a reverse mortgage closing.
How Much Can Be Borrowed?
In most cases, maximum reverse mortgage loan amounts are based on the following factors:
- The age of the youngest homeowner
- The appraised value of the home
- The current interest rate
- The locally established lending limit
In general, the older you are, the more your home is worth, and the lower the interest rate, the more you’ll be able to borrow. Ask your Consumer Equity Reverse Mortgage Expert for further details.
Payment Options
Reverse mortgage customers have differing needs. Some would rather receive their entire loan amount up front, while others prefer a steady monthly stream of funds to supplement their other income. Regardless of how you choose to receive your proceeds, you can adjust your plan as often as you wish to accommodate changing needs.
Reverse mortgage funds-distribution plan options include:
- Lump Sum — A specific amount is made immediately available (often used to pay off an existing mortgage).
- Term — Funds are released in set monthly amounts for a set period requested by the customer.
- Tenure — Loan proceeds are distributed in equal monthly allotments for as long as at least one customer continues to occupy the home as a principal residence.
- Line Of Credit — Funds remain available for the customer to draw on as needed.
- Combination — Customers receive any combination of lump sum, monthly, or line of credit distributions.
Interest Rate
Reverse mortgages are variable-rate loans. In most cases, you may choose monthly or annual adjustments. Interest rate adjustments have no effect on the number of loan advances you can receive, but they do cause your loan balance to grow at a faster or slower pace. Fixed rates are now also available.
Repayment of Reverse Mortgage
Please ask your Consumer Equity Reverse Mortgage Expert for details about when repayment may be due. The balance due can come from home sale proceeds, or from other resources, such as savings, insurance or possibly applying for a new mortgage. There is no requirement that the home be sold, only that the loan be repaid.
Possible Effects On Other Benefits
Reverse mortgage loan proceeds are not considered income and will not affect Social Security or Medicare benefits. However, receiving monthly reverse mortgage advances could affect your eligibility for some public assistance programs that are based on need. Consult a local attorney to determine how — or if — a reverse mortgage funds-distribution plan might apply to your specific situation.
