What is a reverse mortgage?
A reverse mortgage is a loan that enables senior homeowners, age 62 and older, to convert part of their home equity into tax-free income. While keeping title and not having make monthly mortgage payments. The loan is only due when the last borrower permanently leaves the home.
What influences my eligibility to get a reverse mortgage:
- age... 62 or older
- equity... even if you still owe on a first mortgage,
- residence... must be your primary (no, resort or second homes allowed)
- home type...single family (some programs also accept two-to-four unit buildings, condominiums and manufactured homes built after June 1976
- homes in a living trust
- FHA's lending limits
What does not influence my eligibility to get a reverse mortgage:
What are a few of the most significant advantages of a reverse mortgage?
- Remain independent and keep title of your home
- Stay in your home and keep ownership
- .No monthly mortgage payments required. You need not pay back the reverse mortgage loan nor make any monthly mortgage payments until you permanently move out of the home
- .Tax-free money. Because the money you receive from a reverse mortgage is not considered income, it is tax free and will not affect your Social Security or Medicare benefits
- .Freedom and flexibility. The money you get from a reverse mortgage is yours to use in any way you choose.
- You keep title to your home... the lender can not take your home even if you outlive the loan
- Providing you qualify...you can refinance your reverse mortgage
- No limits to how you use your money
- you have a wide range of payment options:
- lump sum
- equal payments as long as on borrower lives in the home
- equal payments for a fixed period
- line of credit
- line of credit with monthly payments as long as one borrower lives in the home
- or a combination of the above
- Repayment is due when:
- last surviving borrower passes away or sells the home
- all borrowers permanently move out of the home
- the last surviving borrower fails to live in the home for 12 consecutive months
- the borrower fails to pay property taxes or hazard insurance
- the borrower does not maintain the home in reasonable condition
- any remaining equity belongs to the borrowers or their heirs
- the borrowers or heirs will not be required to pay more than the value of the home, should they wish to keep it
You are still responsible for:
- property taxes
- hazard insurance
- maintaining the home in reasonable condition - just as they would with a standard first mortgage or home equity loan.
- mobile homes and cooperatives are generally not eligible for a reverse mortgage
Federally-insured reverse mortgages
- Home Equity Conversion Mortgages (HECM)
- Home Keeper is Fannie Mae's
What are the fees with a reverse mortgage:
- origination fee
- third party closing costs (such as appraisal, title and escrow)
- monthly servicing fee
TALC or "Total Annual Loan Cost." combines all of the costs of a reverse mortgage. Be sure to have your counselor and lender explain how this can effect your total cost when comparing different reverse mortgage programs..