What is a Reverse Mortgage?
A Reverse Mortgage is a special type of loan for people 62 or older. The home serves
as collateral, as in any mortgage, but thanks to government-mandated provisions,
the homeownership is protected.
The key characteristics of a Reverse Mortgage are:
- CASH and LIQUIDITY &
- EASY QUALIFICATION
How does a Reverse Mortgage protect my heirs and me?
The older we get, the less risk we should take; the better we should protect our
health, family, home and financial situation. Protection is one of the key elements
of the Reverse Mortgage.
Your home is protected. With a Reverse Mortgage you remain the owner and you keep
title to your home.
The Reverse Mortgage has been designed to allow homeowners to stay in the home,
own the home, and still enjoy the assets of the home while living in it. The protection
of homeownership is the highest priority of the Reverse Mortgage. You keep title
to the home. You are the owner as long as you or your spouse lives in the home.
You never have to make monthly payments to the lender.
No payments are due as long as you or your spouse live in the house. The Reverse
Mortgage, with accrued interest, becomes due when neither you nor your spouse live
in the home anymore.
You never owe more than the value of the home.
Should the outstanding amount of your Reverse Mortgage exceed the value of your
home, the Federal Government’s insurance will kick in and cover the difference –
you never owe more than the value of your home.
You enjoy the full appreciation of the home.
When you pay back the Reverse Mortgage, your equity is the difference between the
value of the home and the accrued balance of the Reverse Mortgage. Thus, if the
value of your home appreciates, you enjoy all the appreciation.
How does a Reverse Mortgage help me with cash?
“You can be young without money, but you cannot be old without it.” --Tennessee
Three ways to get cash from a Reverse Mortgage.
You decide how you want to receive cash from a Reverse Mortgage:
As a lump sum upfront
A lump sum upfront is often used to pay off an existing mortgage, or expensive credit
card debt or unexpected bills.
As monthly income
Supplement your pension or social security income.
As a line of credit
A line of credit is a financial safety net; it provides instant access to cash whenever
you need it.
You are free to do whatever you want with the cash from a Reverse Mortgage.
It is your money; there are no restrictions on what you do with the cash from the
Reverse Mortgage. Use it for your health and well-being, your travels, your grandchildren….
It's your choice.
All proceeds that you receive through a Reverse Mortgage are tax free.
The proceeds you receive from a Reverse Mortgage are not taxed and will not move
you into a higher tax bracket.
Your social security payments continue. They are not impacted by a Reverse Mortgage.
Legally you are tapping equity and not receiving income, so social security payments
are not affected. However, Medicaid or other complementary programs may be affected
in certain situations. As always, consult a specialist.
Do I qualify for a Reverse Mortgage?
Reverse Mortgages are quite easy to qualify for.
Minimum age 62
The youngest of the borrowers has to be at least 62 years old.
You must own a home to qualify for a Reverse Mortgage. If there is a mortgage or
other lien against the home, this has to be paid back with the Reverse Mortgage.
The home may also require some repairs. In most situations, these may be paid from
the Reverse Mortgage.
Bad credit accepted. No income requirements
There is no income requirement, nor is the Reverse Mortgage affected by your credit
rating. However if you ever defaulted on a federal loan, this may disqualify you
from a Reverse Mortgage.
You should definitely talk with an experienced specialist. There may be other causes
that may disqualify you or may make the Reverse Mortgage an unattractive solution.