Reverse Mortgages

Reverse Mortgages

If you own your home and are 62 years or older, a reverse mortgage can allow you access to your home’s hard-earned equity without having to sell or move from your property. It’s important to understand how the reverse mortgage loan works before signing up, as some types have some downsides.

A reverse mortgage lets you borrow against your home’s equity. This allows you to receive cash without having to sell your home. Borrowers are given the option to choose to receive a lump-sum payout, regular payments, or set up a line of credit that allows you to access the money whenever it’s needed.

As long as you are living in your home you do not need to pay back your reverse mortgage. You also do not need to make any payments on the loan. However, you will need to keep up with your other housing costs such as property taxes, homeowners insurance, repairs, etc.

When you pass away the loan becomes due. Your heirs can pay off the loan balance if they want to retain ownership of the property or they can let the lender keep the property to settle the debt.

If you change your primary residence before you die, you will need to repay the loan in full, which is typically done by selling the home. The lender sees it as a change of residence if you live outside your property for more than six months in a year for non-medical reasons or twelve consecutive months for medical reasons

Benefits

Access to Cash Through Home Equity:
You get access to your home’s equity without having to sell your home. These funds can offer extra money during your retirement in order to pay off debt, maintain your lifestyle, or handle any surprise expenses.

No Monthly Mortgage Payments:
Just like a reverse mortgage, a home equity loan borrows against your home’s equity. The difference is that with a home equity loan, you make monthly mortgage payments, which cuts into the amount left for you to spend. With a reverse mortgage, there are no monthly payments. The loan only needs to be repaid once you sell your house, move out or pass away. You don’t need to pay off any of the loan balance or interest before then.

Maintain Ownership of Your Home:
You are still the owner of your home when you take out a reverse mortgage. The lender doesn’t receive the title or the right to sell your property as long as you keep up with the housing costs (This includes property taxes and homeowner’s insurance). The house remains yours until you move or pass away and even if you move you will still have the option to pay off the loan to keep your property.

Flexible Payment Options:
There are numerous ways to borrow through a reverse mortgage, including taking lifetime payments, a lump sum, or a line of credit. You might be able to switch to a different payment option during your loan, such as switching your line of credit for guaranteed lifetime payments.

Social Security and Medicare Not Affected:
When you receive any money from a reverse mortgage, it is considered a loan and not income. As a result, your Social Security and Medicare will never be affected.