A reverse mortgage is an increasingly popular loan for senior homeowners age 62 and over. It allows senior homeowners to tap into their current home equity or purchase a home without using all their cash. There is no monthly mortgage payment but homeowners are still responsible for paying property taxes, insurance, and maintenance. The repayment of the loan is deferred until the homeowner dies, sells or moves out of the home.
To qualify for a reverse mortgage loan you must own a home, be at least 62 years old and have enough home equity. The loan works in two ways. First, payments are made to the borrower based upon a percentage of the equity that has been built up in the home. Second, any current mortgage is paid off thus eliminating the monthly mortgage payment. The loan is repaid when the borrower sells the home, moves out of the home or dies. The factors that impact the amount you are eligible for include your age, the value of your home, interest rate and loan limits.
As with any large decision, it's important to understand the pros and cons.
• You continue to live in your home and retain title to your home, as long as you continue to pay your property taxes, insurance, and maintenance.
• You generally receive the proceeds of the loan as tax-free cash in which you can use the money as you see fit. It is recommended though to speak with your financial advisor to verify your specific situation.
• You no longer make monthly mortgage payments, during the course of the loan. You do have to follow the constructs of the loan guidelines and are responsible for paying your property taxes, insurance and maintenance.
• A reverse mortgage is a non-recourse loan. Neither you nor your heirs are liable for any amount of the mortgage that transcends the value of your home.
• There are several ways in which you can receive the proceeds of the loan.
• Many lenders offer a free reverse mortgage loan calculator which allows you to get an estimate as to how much you may qualify for.
• Fees associated with the loan are generally higher than with other financial products. You should ask your lender about options available.
• The balance of the loan increases over time as does the interest on the loan and the fees associated.
Contact a mortgage professional to learn how you can use this valuable tool to enjoy your retirement.
ABOUT THE AUTHOR
Toni F. Ryan | NMLS#230507
Senior Loan Consultant
Peak Residential Lending
Toni F. Ryan has over 20 years experience in mortgage lending - both on the wholesale and retail levels. She believes that education is key to making the best decision for YOU! She shares her insight into the lending world here and encourages your feedback. Don't forget to connect on Facebook!