Reverse Mortgages

 

WHAT IS A REVERSE MORTGAGE?

     A Reverse Mortgage is a unique loan program that enables homeowners that are age 62 and older to use their equity without creating a monthly payment obligation. Thus, the reverse mortgage program enables seniors that may be “real estate rich and cash poor” to unlock the financial potential in their homes, and let their homes work for them. Additionally, the reverse mortgage has no income or credit requirements to qualify.

       In general, the reverse mortgage does not become payable until the senior homeowner no longer occupies the property as his primary residence. At that time, the outstanding principle and the accrued interest become due. Typically, the loan is paid off with the proceeds of the sale of the home from the borrower’s estate. However, the borrower’s estate/family may decide to refinance the loan and retain the property. Any proceeds in excess of the amount owed to the lender belong to the borrower or the borrower’s estate.

       Thus, the reverse mortgage is simply a loan against the borrower’s principle residence. The borrower retains ownership of the home. If the borrower decides to sell the property any funds in excess of the payoff amount belong the borrower, as is the case with a regular mortgage or home equity loan.

Reverse Mortgages Differ From Regular Mortgages in 3 Important Ways:

To qualify for a regular mortgage, the lender checks your income to see how much you can afford to pay back each month. With a reverse mortgage, however, you don’t have to make monthly repayments. Therefore, your income is not a requirement for a Reverse Mortgage.

With a regular mortgage, you can lose your home if you don’t make your monthly repayments, however, with a reverse mortgage you can’t lose your home by failing to make monthly loan payments because you don’t have any payment to make.

When you qualified for your original purchase, the lender checked you credit to make sure you paid your bills on time, used a credit score, & calculated your percent of debt to your income. However, with a reverse mortgage, we don’t look at your credit score or debt ratios.

A reverse mortgage is worth your consideration if it fits your particular circumstance. A reverse mortgage will allow you to cost-effectively tap into your home’s equity and enhance your retirement income. If you have some bills to pay, want to buy some new carpeting, furniture, need to paint your home, or simply feel like eating out and traveling more, a reverse mortgage may be the perfect solution.  Check out more on reverse mortgages here.