A Home Loan that Does Not Require Monthly Payments
If you're 62 years or older and have a considerable amount of equity in your home you may be able to convert your asset into fixed income. A Reverse mortgage is a loan designed with seniors in mind. The payments are made to you for as long as you live in the home and you are not required to repay the loan.
You have the ability to:
- Use your home as a line of credit and take money out as needed
- Take lump sum
- Take a fixed amount each month
As your needs change over time you can choose the ways in which you are paid out. Once you leave the home the reverse mortgage becomes due and typically the home is then sold and any remaining equity is left to your heirs.
Important Facts About Reverse Mortgages
- Lender does not own your home, you own the home and title is held in your name.
- 62 years or older to qualify.
- No income or credit score requirements.
- No monthly payments are required.
- Requires a good amount of equity in the home but it does not need to be free and clear to qualify.
- Social Security and Medicare payments are not affected as a reverse mortgage is not considered income.
- Funds can be taken in monthly or lump sums or you can use your home like a line of credit.
- Must be your primary residence.
- Due date is typically the youngest borrowers 150th birthday or upon leaving the home.
- If the home is sold for more than the balance due on the loan, the borrower or their heirs receive the difference, not the bank.
- Is considered a non-recourse loan which means there is no personal liability to the borrower or their heirs so if the home is sold at fair market value for less than the loan balance. Neither the borrower or their heirs are left with owing the remaining loan balance so borrowers are not leaving a financial burden to their heirs.
- The Federal Housing Authority (FHA), offers and insures the loan through the Department of Housing and Urban Development (HUD) .
- There are no out of pocket expenses with the exception of the cost of the appraisal.
- Fees are regulated by HUD and are not allowed to be marked up and junk fees are not allowed.
HUD Advantages Include
Department of Housing and Urban Development advantages include:
- Guarantees the lender against shortfalls.
- Guarantees the funds are made available to you.
- Ensures that a reverse mortgage is a non-recourse (no personal liability) loan.
- Requires counseling that is performed by an independent third party who is HUD trained and certified.
If you are 62 years of age or older and would like to remain in your home while eliminating mortgage payments, take money out of your home as desired, give us a call and we can walk you through the process and answer any questions you may have.