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Reverse Mortgages

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Reverse Mortgages

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 works much like traditional mortgages, only in reverse. Instead of making a monthly payment to your lender, the lender pays you. You do not make any payments on your reverse equity loan when you are in it. Funds obtained from a Reverse Mortgage may be used for any purpose such as home improvement, vacation, a new car, or savings.

To qualify for an Reverse Mortgage, you must own your home. The Reverse Mortgage funds may be paid to you in a lump sum, in monthly advances, through a line-of-credit, or in a combination of the three, depending on the type of Reverse Mortgage and the lender. The amount you are eligible to borrow generally is based on your age, the equity in your home, and the interest rate you qualify for.

Because you retain title to your home with a Reverse Mortgage, you also remain responsible for taxes, repairs, and maintenance. Depending on the plan you select, your Reverse Mortgage becomes due with interest either when you permanently move, sell your home, die, or reach the end of the pre-selected loan term. The lender does not take title to your home when you die, but your heirs must pay off the loan. The debt is usually repaid by refinancing the loan into a forward mortgage (if the heirs are eligible) or by using the proceeds from the sale of your home.

Reverse Mortgage Benefits

You choose one of the following payments each month:

  1. No payments are required as long as you live in your home.
  2. Income received from your Reverse Mortgage is usually tax-exempt (consult your tax advisor) and does not affect regular Social Security or Medicare benefits, but may affect eligibility for other types of government assistance.
  3. You retain ownership of your home.
  4. You can use the proceeds to pay off an existing mortgage and eliminate your monthly mortgage payments.
  5. Reverse Mortgages provide you with a source of income that can be used to improve your standard of living and maintain your independence.

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