What is a reverse mortgage?
This loan program is for the benefit of seniors giving them the ability to supplement their income. It is a contract between the lender and the homeowner in which the lender makes regular payments to a homeowner for a specific period of time. The monthly payment received by the homeowner is based on the amount of equity the homeowner has in the home. The monthly payment is a non-recourse loan hence; the payment is tax free to the homeowner. The homeowner is allowed to reside in the home until they relocate or till death of homeowner. At that period, the lender sells the home and recovers his loan.
A. A reverse mortgage is a loan that enables homeowners, age 62 and older, to convert a portion of their home equity into tax-free* income–without having to sell their home, give up title to it, or make monthly payments. A reverse mortgage only becomes due once your home is sold or estate is settled. * Consult your tax advisor.
A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. The HUD HECM (home equity conversion mortgage) reverse mortgage provides these benefits, and it is federally-insured as well.
AARP.com defines a reverse mortgage as: “A loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways: • All at once, in a single lump sum of cash; • As a regular monthly cash advance; • As a “credit line” account that lets you decide when and how much of your available cash is paid to you; or • As a combination of these payment methods. No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.” Click here to learn more about our Reverse Mortgage Counseling.
Reverse mortgages – a special type of home loan – are becoming popular in Americ They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, and more. Borrowers must be at least 62 years old and occupy as their principal residence a home that has little or no mortgage debt remaining. The maximum loan amount depends on the age of the borrower, the expected interest rate and the appraised value of the property. There are many payment options available. For example, borrowers may receive monthly payments for a fixed period they select, or as long as they occupy the home as a principal residence. Reverse mortgage need not be repaid until the borrower moves, sells or refinances the property, or dies. FHA insures the lender against the risk that proceeds from the sale of the property may not be sufficient to pay off the mortgage balance.
