Reverse Mortgage
What is a Reverse Mortgage?
A Reverse Mortgage is a loan that affords seniors, 62 or older, the benefit of converting the equity in their home into money without making monthly repayments, giving up title to the home or selling their home. The proceeds are received as one time lump sum payment, a line of credit, tenured monthly payments or a combination of these options. Because you are using your own homes equity, the money is tax free*. The percentage of equity made available to you depends largely on your age, the current interest rates and value of your home, so the older you are and the more your home is worth, the more money will be available to you.
*Consult your tax advisor.
What are the advantages of a Reverse Mortgage?
Reverse Mortgages have the following advantages:
A Reverse Mortgage is a loan that affords seniors, 62 or older, the benefit of converting the equity in their home into money without making monthly repayments, giving up title to the home or selling their home. The proceeds are received as one time lump sum payment, a line of credit, tenured monthly payments or a combination of these options. Because you are using your own homes equity, the money is tax free*. The percentage of equity made available to you depends largely on your age, the current interest rates and value of your home, so the older you are and the more your home is worth, the more money will be available to you.
*Consult your tax advisor.
What are the advantages of a Reverse Mortgage?
Reverse Mortgages have the following advantages:
- You can stay in your home – You retain title of your home and can remain in it.
- No monthly mortgage payments – You will not make any monthly mortgage payments or have to repay the loan until you move out of the house.
- Independence – The Reverse Mortgage will allow you extra money to help with expenses, help your family or travel.
- Tax Free Money* - The money you receive from the Reverse Mortgage is not considered income and therefore will not affect your Social Security or Medicare benefits.
- *Consult your tax advisor
- Flexibility – The money from the Reverse Mortgage is available for anything that you would like to spend it on.
- Home Equity Conversion Mortgages (HECM) – These loans are insured by the U.S. Department of Housing and Urban Development (HUD). These are the most common type of reverse mortgage and offer the benefits of no monthly payments, no income or credit requirements, unrestricted use of the proceeds of the loan and flexible withdrawal options.
- Home Keeper – These loans are secured by Fannie Mae, a government sponsored agency. The features of this loan are the same as the Home Equity Conversion Mortgage except you may also be able to use the Home Keeper to purchase a home.
- Proprietary Reverse Mortgages – These are loans that are given from private lenders and have unique features depending on the lender that is issuing the loan. These features include items such as higher loan amounts than the Home Equity Conversion Mortgages or Home Keeper loans, the ability to lend on unique property types such as co-ops and the ability to lend when the property is held in unique types of trusts.
What can I use the money for?
There are no restrictions on how you choose to spend your money. Therefore, it can help you with daily living expenses, medical expenses, home improvements or you can take that trip you have always dreamed about. Maybe you just want to save the money and enjoy the piece of mind of being financially secure.
Is counseling required?
Yes. All products require counseling to ensure you are clear on how the mortgage works and that you have selected the reverse mortgage that is best for your needs.
Does the mortgage have to be on my primary residence?
Yes. Reverse mortgages are only available for your primary residence.
Do I need to make monthly payments on a Reverse Mortgage?
No. You do not make monthly payments to the reverse mortgage lender. However, you still are responsible for paying the taxes, insurance and upkeep of the home.
When does a Reverse Mortgage get repaid?
Reverse Mortgage must be repaid, frequently called the maturity event, when one of the following conditions occurs: (a) you sell the home (b) the home is no longer your primary residence (c) the borrowers fail to live in the house for 12 consecutive months because of illness (d) all of the borrowers pass away
Do I need good credit or income to qualify?
No. Credit and income are not used to qualify for this loan. Only the age of the borrower, property value and current interest rate are used to determine the amount of the loan available. If there is an existing mortgage or judgments against the property, they will have to be paid off at time of closing. All other credit card and installment debt can remain open.
What options are available for me to receive the money from the Reverse Mortgage?
There are many options for receiving your money. First, you may take the money as a lump sum. This is beneficial if you need money immediately, but will not allow you access to any future money. Another option is to set up a credit line. This will allow for money to be withdrawn using a check book up to a predetermine credit limit. This is advantageous if you do not have a need for the money now but foresee the need in the future. Interest does not accrue on the money that you have not withdrawn. Yet another option is to elect for a tenure monthly payment that will give you the same amount of money each month until the maturity event. This is great if you are looking for long lasting and consistent extra monthly money to help with living expenses. Lastly, it is possible to set up a combination of all three options. Your Mortgage Consultant will be able to best guide you with this decision.
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