Reverse Mortgage Overview
For homeowners age 62 or older, a reverse mortgage is a type of home equity loan that allows you to convert some of the equity in your home into cash while you retain home ownership.
A reverse mortgage is a government-backed home loan that allows a homeowner to access the existing equity in their home and convert it to cash. Instead of making monthly mortgage payments like a traditional home loan, Reverse Mortgages are paid back in one lump sum when the borrower no longer resides in the home.
For all qualified applicants, at least 62 years old and occupy the home as their primary residence. There are no employment or health requirements.
Reverse Mortgage Benefits
- No FICO qualification
- No debt-to-income ratios – though borrowers must demonstrate a willingness and capacity to pay basic obligations
- Provides greater freedom in retirement – you aren’t restricted on how you can use the loan proceeds and it is non-taxable income
- Non-recourse loan
- No debt is assigned to your heirs when the loan becomes due. Instead, the family is given a period of time to pay off the loan or sell the home. In addition, family members/heirs are given the opportunity to buy the property for 95% of the appraised value, even if the house is worth less than the amount owed
- A reverse purchase can help a borrower retain their savings, improve their monthly cash flow, and / or finance a purchase that would normally be beyond their budget
- It can help seniors relocate to a different region or to move closer to family
- It can also help seniors move into a more affordable home that requires less maintenance, or better serves their physical needs by providing features like handrails, wider doors, or a single-story layout
- Helps borrowers age in place
Reverse Mortgage Requirements
- Borrowers must be 62 years of age or older
- Borrowers must qualify to pay taxes, insurance, or HOA if applicable
- You can own your home outright, or have a low balance on your mortgage that can be paid off at closing with proceeds from the reverse loan
- The borrower also must have financial resources to pay ongoing property fees
- Before obtaining this type of loan, all borrowers and non-borrowing spouses must receive independent counseling
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