A reverse mortgage is a unique type of loan which allows you to convert part of the equity in your home into cash without having to sell your home. If you are age 62 or older and own a home, you may want to consider a reverse mortgage to pay off your current mortgage, supplement your income, travel or pay for healthcare costs. Another option is to sell your current home and use a reverse mortgage to PURCHASE a home more suitable for your needs, i.e. one-level living!!
When you secure a “forward” mortgage, or a regular mortgage we are all familiar with, you pay the lender each month over time. In a “reverse” mortgage, the lender pays you. This money is tax free and you don’t have to pay back the money as long as you reside in the home. Should you die or move elsewhere, you, your spouse or your estate will sell the property and settle the loan. During this time you keep title to your home. This means you are responsible and must continue to pay property taxes and insurance as you would with any mortgage, in addition to paying for your regular utilities and maintenance as necessary. The most popular reverse mortgages are Home Equity Conversion Mortgages (HECMs) and are federally insurance mortgages backed by the U.S. Department of Housing and Urban Development (HUD). The upfront costs to obtain such a loan can be high and the amount you are eligible to borrow is based on several factors such as age, current rates, and the appraised value of your home.
Counseling is required prior to securing a reverse mortgage. The counselor explains the loan’s costs and other financial considerations. These counseling agencies generally charge a small fee.
Here are two websites that can provide more information.
I believe the reverse mortgage is a great tool and allows homeowners to remain in their homes. However, an even greater benefit, I believe, is that you can use a reverse mortgage to PURCHASE your next home. This may interest you if your current home no longer meets your needs (stairs and no bedroom on the first floor, or you need room for a walker or wheelchair). Here you would sell your current home and spend a portion of the net proceeds from that sale to purchase a newer, open floor plan model.
Feel free to contact me for further information. As a Certified Senior Advisor and experienced mortgage consultant I will help make sure you understand what is best for you.
Maria S. Gempler, CSA Mortgage Consultant, NMLS#333671
American Mortgage & Equity Consultants, Inc.