Is a Reverse Mortgage Right for You?
- posted 9.7.2015
- Nicole Johnson
- Home Loans
Reverse Mortgages are designed to help older homeowners manage their retirement finances by allowing borrowers to convert a portion of their home equity into liquid assets. Rather than making traditional monthly payments, this type of loan defers repayment until the homeowner moves or passes away.
Borrowers are still responsible for paying property taxes, hazard insurance, homeowner's association dues and any other property charges.
A Reverse Mortgage is non-recourse loan, which guarantees that borrowers will never owe more than the value of their home. This is possible because of a government insurance program. The loan cannot be outlived, so no debt will be left to heirs and at the end of the loan any remaining equity belongs to them. In fact, heirs are allowed to buy the property for 95% of the appraised value, conducted at the end of the loan, even if the house is underwater.
You retain ownership of your home, without making a monthly mortgage payment.
Reverse Purchase allows older homeowners the ability to purchase a new principal residence with a Reverse Mortgage.
Since it requires less upfront investment than an all-cash purchase and no monthly mortgage payments, Reverse Purchase can help preserve savings, improve monthly cash flow, and/or finance a purchase that would otherwise be beyond budget.
The program was designed to empower older homeowners with a financial tool to help them relocate to another geographical setting or closer to family. It can also help seniors relocate to a home that is more affordable, requires less maintenance, or better serves their changing physical needs with features like handrails, wider doors, or a single-story floor plan.
Borrowers must be 62 years of age or older.
Recent program changes now allow for younger, non-borrowing spouses to remain in the home and defer repayment after the borrowing spouse passes away and refinancing is not a viable option.
All borrowers and non-borrowing spouses must receive independent counseling. Family members and trusted advisors are also encouraged to attend. A Loan Officer can provide a list of approved counselors with a proposal package.
Reverse Mortgage experts can help determine if a borrower qualifies and answer any questions.