Reverse Mortgage Facts

Reverse Mortgage Facts

• Eligibility: Age 62+
• Gives you access to cash from your home
• Eliminates mortgage payment
• Guaranteed, Insured and Regulated by the FHA
• Has no effect on Social Security, Medicare or Pension income
• Multiple ways you can receive the money (lump sum, monthly payments, line of credit)
• Stay in your home and own your home without ever making another monthly mortgage payment
• Remember, like any homeowner, you are still responsible for taxes, insurance & maintenance
• Money you receive is 100% Tax Free
• You and your heirs are never put into a negative debt position

Reverse Mortgages are loans that allow you to borrow back the equity in your home. Just as you once paid the bank, the bank now pays you. Isn’t that a nice change?

If you are 62 years of age or older, they are a way to borrow against the equity in your home (the value of your home minus any mortgage debt you now have) to provide you with tax-free income. Seniors struggling because of falling retirement account balances and increases in the cost of medical care are looking for new sources of cash to maintain their standard of living.

The amount you can borrow depends on your age, the value of your home and interest rates.
Fortunately, you continue to own and live in the home for the life of the loan. There are no loan payments until you sell the house, die or move out for a period of a year or longer.

You can get the money as a line of credit, a monthly payment, a lump sum, or a combination of all of these. A monthly payment is a guaranteed of income for as long as you live in your residence, whereas; a lump sum could be used as you wish, such as to purchase an annuity that could provide you with a life long income. With a line of credit, you don’t have to pay interest on money you haven’t withdrawn and your money will earn interest while it’s waiting to be used by you.

A Reverse Mortgage might be worth considering if:

-You plan to stay in your home.
-You want to enhance your lifestyle and enjoy your golden years.
-You want funds for major expenses such as medical bills, or for major home repairs.
-You need additional income to live on and your only significant asset is your home.
-You want the peace-of-mind that comes from knowing your financial needs are taken care of.
-You own your home free and clear, or you have a small first mortgage.
-You don’t plan to leave your home to your heirs.

What are some of the potential advantages of Reverse Mortgages?

-It can help you maintain your financial independence or improve your quality of life.
-You can stay in your home and keep title to the property.
-The money you receive is tax-free and is not usually considered income.
-You make no payments until the loan ends or the house is sold.
-Your income is not a consideration in obtaining the loan since there are no payments until the loan ends.
-You cannot owe more than the value of the home at the end of the loan.

If you’re a senior, I hope you can see the benefits of taking advantage of this income source, if you need it.

To recap part 1, Reverse Mortgages are loans that allow you to borrow back the equity in your home. If you are 62 years of age or older, they are a way to borrow against the equity in your home to provide you with tax-free income. Probably a good idea if you’re a senior who needs cash for medical care, to maintain your standard of living, or for other reasons.

So, what are some of the disadvantages of Reverse Mortgages?

– They are even more complicated than conventional mortgages so you need be dealing with an experienced provider that has been doing this for long time and understands the ropes.
– They may be relatively expensive compared to other alternatives.
– Although the money you receive is tax-free, it may affect your eligibility for “need based” public assistance benefits such as Medicare, Supplemental Social Security Income (SSI) and Medicaid/MediCal.
– Reduces the equity you have in the property which could cause a potential negative impact for your heirs.
– This source of funds is often not well understood, even by real estate and legal professionals. (Check out their experience before accepting their advice.)

Here are some things to think about before getting this financing :

-How much money do you need?
-Is there another way to get the money you need ?
-Will a Reverse Mortgage make you or your partner ineligible for any government benefits – now or in the future?
-Do I qualify for this kind of Mortgage?
-How much can you borrow ?
-How much will it cost you in fees and interest to borrow this money, even if you don’t have any out-of-pocket expenses?
-Will you have to sell your house before you die to pay off the loan ?
-If you die, and your spouse is still living in the home, will he or she have to leave or pay it all off ?
-Will the loan become due and payable if you go to a long-term care or nursing home?
-What will your heirs or you have left after the loan is paid off?
-Are there any early-repayment penalties?
-What are your obligations, such as property maintenance, property taxes and insurance?

Seven important things to do before you make a decision :

1. Decide how long you expect to stay in your home. These loans are relatively expensive for the first 2-3 years, so consider other options first.

2. Consult with a HUD-approved Reverse Mortgage counselor before you apply. This information service is usually offered free of charge. A counselor can help you decide what kind of financial help you need and what type is best.

3. Decide if you really need it. Another type of loan may be a less costly solution to meet your financial needs.

4. You might want to Include your family, especially grown children, in the decision-making process. It’s good to get a general agreement among your heirs that going ahead with this type of mortgage arrangement is okay with them. Remember, you may be reducing their inheritance.

5. Shop around for the best deal. It may affect how much money you get immediately and in the long-term, how the money is paid out, how much you pay in interest and other charges, and so on.

6. Determine if your Mortgage affects your eligibility for “need based” public assistance benefits you may receive.

7. After you have considered all the facts, does getting a reverse mortgage make you happy ? If yes, that’s a good sign. If you’re not sure, best to examine all of the alternatives again.