Thanks to the reverse mortgage program, more and more seniors are able to stay in the home they love while enjoying a life that’s free from financial burden. Before jumping on the bandwagon, it’s important to educate yourself on what a reverse mortgage is and how you can use it. Below, you’ll find some of the important information you need to know when deciding if a reverse mortgage is right for you.
Understanding Reverse Mortgages
Also known as a Home Equity Conversion Mortgage (HECM), a reverse mortgage is a tax-free* loan that is withdrawn from the equity of your home. The money is used to pay off the rest of your mortgage and provide you with a stronger sense of financial security. Instead of paying the lender, the lender pays you and does not require you to make any payments on the loan until it is due.**
Qualifying for a Reverse Mortgage
You may qualify for a reverse mortgage if you are a homeowner who is at least 62 years of age and use your home as your primary residence. The home must also have sufficient equity and meet the minimum standards set by the Federal Housing Administration (FHA).
Obtaining Your Proceeds
Once your loan closes, there are a few ways you can receive your money and they are dependent on the loan program you choose to best suit your need.
In a Fixed Loan Program, you can only receive your money one way – in one lump sum. In this option, you receive your money all at once.
In an Adjustable Loan Program, you can receive your cash in the following ways:
- One Lump Sum – You get all of your money at once.
- Monthly Payments – Your payments are stretched out over a specific time frame and you receive fixed monthly payments based on that.
- Line of Credit – Your money is available to use when you need it and you only owe what you use. The great thing about Line of Credit is that your amount grows over time while it is not being used.
- Any combination of the above
Using Your Reverse Mortgage
You have the freedom to do whatever you choose with your reverse mortgage money. Some use the money to pay off debts and medical expenses, make home repairs, delay social security***, or fill their retirement with travel, fine dining, and leisure activities.
Reaping the Benefits of a Reverse Mortgage
You’ll discover many benefits that come with your reverse mortgage including some of the following:
- You are no longer required to pay a monthly mortgage!
- Your mortgage is secure because it is insured by the federal government.
- You have the freedom to use your tax-free money however you choose.
- Your name stays on the title of your home. The lender is not on your title.
- Your reverse mortgage is a non-recourse loan, meaning you will never owe more on your loan than the loan balance or the value of your home.
If you are interested in beginning the reverse mortgage process or want to know more, fill out the form to the right of this page or give us a call anytime.
*Please consult with your financial advisor.
**Homeowner is still responsible for taxes, insurance and property maintenance.
***May affect SSI or Medicaid. Please consult with your financial advisor.