Reverse mortgages are designed specifically for senior homeowners, 62 or older.
A typical mortgage requires the homeowner to pay the lender monthly, with a reverse mortgages the opposite is true. The homeowner with equity may receive money monthly, upfront lump sum, a line of equity, or a combination of monthly payments and a line of equity.
Reverse advances are not taxable, and generally don’t affect your Social Security or Medicare benefits. You retain the title to your home, and you don’t have to make monthly repayments.
Advantages to reverse mortgages:
- You are not required to qualify for a mortgage based on your income. A reverse loan is based on age and the value of your home.
- Supplemental retirement income.
- Lump sum disbursement upfront.
- Paying off of a current mortgage with no monthly payments required from the homeowner.*
- You may use your proceeds to pay off other debt.
- Tax advantages. (Talk with your tax advisor for details)
- Allow the homeowner to remain in their home without monthly mortgage payments.*
There are other factors to consider:
- *You retain title to your home, but you are responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses.
- Although some reverse mortgages have fixed rates, most have variable rates that are tied to a financial index: they are likely to change with market conditions.
- Unlike a typical mortgage where the blance reduces every monthy when a payment is received, a reverse mortgage can have a credit line option, wher the unused portion grows montly to allow for a larger available line each year.
- Most reverse mortgages have a “non-recourse” clause, which prevents you or your estate from owing more than the value of your home when the loan is repaid.
- Typical cost are an origination fee, mortgage insurance premium (for federally-insured HECMs), and other closing costs for a reverse mortgage. In most cases a borrower may finance them into the mortgage.
- Interest on a reverse mortgage is not deductible on income tax returns until the loan is paid off in part or whole.
- The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence.
To see if a Reverse Mortgage is right for you, contact us today.
Additonal Resource - Reverse Mortgages: Get the Facts Before Cashing in on Your Home’s Equity