Introduction to Reverse Mortgages
A reverse mortgage is a special type of loan used by elder Americans to convert the equity in their homes into cash. The money from a reverse mortgage can provide seniors with the economic security they need to fully take pleasure in their retirement years.
The reverse mortgage is aptly named because the payment stream is "reversed." Instead of making monthly payments to a lender, as with a regular first mortgage or home equity loan, a lender makes payments to you.
While a reverse mortgage loan is outstanding, you continue to own the home and hold title to it.
The money from a reverse mortgage can be used for ANYTHING: Daily living expenses; home repairs and home-based modifications; medical bills and prescription drugs; pay-off of existing debts; continuing education; travel; long-term health care; prevention of foreclosure; and other needs.
If your home needs physical repairs (mandatory repairs) in order to qualify for a reverse mortgage, a portion of the proceeds will be set aside for this function.
To qualify for a reverse mortgage you have to be at least 62 and own your own home. There is no income or medical requirements to qualify. You could be eligible for a reverse mortgage even if you still owe money on a first or second mortgage. In fact, many seniors get a reverse mortgage to pay off a first mortgage.
You can choose how to receive the money from a reverse mortgage. The options are: All at one time (lump sum); fixed monthly payments (for up to life); a line of credit; or a combination of these. The largely popular option - chosen by more than 60 percent of borrowers - is the line of credit, which allows you to draw on the loan proceeds at any time.
The size of the reverse mortgage that you can obtain depends on your age at the time you apply for the loan, the type of reverse mortgage you choose, the value of your home, current interest rates, and - now and again - where you live. In general, the older you are and the more valuable your home (and the less you owe on your home), the larger the reverse mortgage can be.
The costs associated with getting a reverse mortgage include the origination fee (which can be financed as part of the mortgage), an appraisal fee, and other charges similar to those for regular mortgages.
The money provided to you from a reverse mortgage is tax-free, and does not affect regular Social Security or Medicare benefits. However, the funds received from a reverse mortgage may affect your eligibility for certain kinds of government assistance, such as Medicaid or state assistance programs, so you ought to check into this before getting a reverse mortgage. To do this you may wish to consult with your local Area Agency on Aging (to locate, call 1-800-677-1116, or visit http://www.Eldercare.Gov,) or a tax attorney.
No payments are due on a reverse mortgage while it is outstanding. The loan becomes due and payable when you cease to occupy your home as a principal residence. This can occur if you (the last remaining spouse, in cases of couples) pass away, sell the home, or permanently move out.
The home does not have to be sold to pay off the loan. You (or your heirs) can pay off the reverse mortgage and keep the home. In any event, the amount owed on the reverse mortgage can never exceed the value of the home at the time the loan must be repaid. Moreover, if the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the surplus money goes to you or your estate.
A further benefit of these loans is that they are "non recourse" which means that no matter how high the loan balance grows, the borrower or their heirs never owe more than the home's market value.
A reverse mortgage is a loan against the equity in the home that provides tax-free cash advances, but requires no payments during the term of the loan. Since there are no monthly payments during the life of the loan, the balance grows larger and the equity gets smaller.
Over the next few weeks, watch your email for further
Information and answers to Frequently Asked Questions about Reverse Mortgages.
At anytime, if you would like to discuss Reverse Mortgages with me, please call my department at the number underneath.
Herb Levin
Eagle Home Loans
3710 N. Kedzie
Chicago, Illinois 60618
(773) 604-7026
Fax: (773) 604-4666
www.HerbLevin.com
