What is a Reverse Mortgage?
Reverse Mortgage Basics
What is a reverse mortgage?
If you are over the age of 62 and have paid off more than 35% of your mortgage balance, a reverse mortgage will allow you to borrow against the equity in your home. Instead of continuing to make mortgage payments, you get paid back the money you already have in it—that’s the “reverse” part.
How do I get my money?
The reverse mortgage program provides the widest array of cash-advance choices, giving you “flexibility for life.” You can take your money in several ways:
- Take a single, lump sum of cash (tax-free).
- Establish a “credit line” account that you control.
- Have the lender send you a monthly payment for life.
In addition, you can choose any combination of these options, and even have the ability to “change your mind” later. You can modify these options at any time down the road, and will not be charged to do so. Remember, the choice is always yours to make.
What can I do with the money?
This is the best part! Once you receive your money, it is totally up to you. Some seniors will choose to save the money, some will establish an emergency fund for long-term care, and many will simply “enjoy life to the fullest.”
What about my children?
Many children of reverse mortgage borrowers are pleased that their parents are able to use their equity and remain living in their homes. Often it is a great relief to these children, that their parents are able to take care of their own needs; many even encourage their parents to do so.
Whether or not you decide to discuss this matter with your children or other Heirs, depends on a variety of personal and family factors. You may value their advice or want to know what they think. Or, you may think it best not to discuss it before making a decision, or not to tell them after you have closed a loan.
On the other hand, to avoid future misunderstanding, you may want to make a note of your decision in your will. Whatever you decide, the important thing is to give some thought to your heirs. We believe you should.
Who should NOT get a reverse mortgage?
A reverse mortgage is not right for you if you have:
- Low home equity (still owe 70% of home’s value) For example, if you own a $100,000 home but still owe $70,000, we do not recommend a reverse mortgage
- Short time left in home (less than 2 years) You wouldn’t buy a house if you planned to move out in just 2 years. The same is true of a reverse mortgage. The closing costs of a reverse mortgage get spread out over time making the reverse mortgage quite inexpensive due to low interest rates. However, in two years there is too little time to spread out the costs.
August 19th, 2009 at 6:55 pm
what is the responsibility of the homeowner in the future. do they never make any more mortgage payments? sounds like there’s a catch somewhere.
August 20th, 2009 at 8:26 am
You are correct, they are never required to make any mortgage payments as long as they have this particular loan.
August 20th, 2009 at 8:30 am
The homeowner is expected to keep the home in good condition and actually reside in the property.
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February 4th, 2010 at 10:11 pm
very interesting.
February 6th, 2010 at 9:43 am
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February 6th, 2010 at 4:48 pm
interesting.
February 6th, 2010 at 9:44 pm
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