Introduction: For many seniors the
equity in their home is their largest single asset, yet it is
unavailable to use unless they use a home equity loan. But a
conventional loan really doesn't free up the equity because the
money has to be paid back with interest.
A reverse mortgage is a risk-free way of tapping into home equity
without creating monthly payments and without requiring the money to
be paid back during a person's lifetime. Instead of making payments
the cash flow is reversed and the senior receives payments from the
bank. Thus the title "reverse mortgage".
Many seniors are finding they can use a reverse mortgage to pay off
an existing conventional mortgage, to create money to pay off debt,
make home repairs, or for remodeling.
Long Term Care Use: For
those seniors who are in need of long term care and want to stay in
their home, a reverse mortgage can create the money needed to pay
for in-home personal and medical care. They can also pay for needed
medical equipment and handicap adaptation to their home.
Features of Reverse
Mortgages: There are no income, asset or credit
requirements. It is the easiest loan to qualify for.
A reverse mortgage is similar to a conventional mortgage. As an
example:
The bank does not own the home but owns a lien on the property just
as with any other mortgage
You continue to hold title to the property as with any other
mortgage
The bank has no recourse to demand payment from any family member if
there is not enough equity to cover paying off the loan
There is no penalty to pay off the mortgage early
The proceeds from a reverse mortgage are tax-free and can be used
for any legal purpose you wish
Misconceptions
About Reverse Mortgages:
"The lender could take my house." The homeowner retains full
ownership. The Reverse Mortgage is just like any other mortgage; you
own the title and the bank holds a lien. You can pay it off anytime
you like.
"I can be thrown out of my own home." Homeowners can stay in the
home as long as they live, with no payment requirement.
"I could end up owing more than my house is worth." The homeowner
can never owe more than the value of the home at the time the loan
is due.
"My heirs will be against it." Experience demonstrates heirs are in
favor of Reverse Mortgages.
Qualifications and Amounts:
Virtually anyone can qualify. You must be at least 62, own and live
in, as a primary residence, a home [1-4 family residence,
condominium, co-op, permanent mobile home, or manufactured home] in
order to qualify for a reverse mortgage.
The amount of reverse mortgage benefit for which you may qualify,
will depend on
your age at the time you apply for the loan
the reverse mortgage program you choose
the value of your home
current interest rates
and for some products, where you live
As a general rule, the older you are and the greater your equity,
the larger the reverse mortgage benefit will be (up to certain
limits, in some cases). The reverse mortgage must pay off any
outstanding liens against your property before you can withdraw
additional funds.
The loan is not due and payable until the borrower or borrowers no
longer occupy the home as a principal residence (i.e. the borrower
sells, moves out permanently or passes away). At that time, the
balance of borrowed funds is due and payable, all additional equity
in the property belongs to the owners or their beneficiaries.
The most popular reverse mortgages are the so-called HECM loans.
HECM loans require that the applicant meet with a government
approved counseling agency to be sure the applicant understands the
reverse mortgage process.
“Before applying for a HECM, you must meet with a counselor from an
independent government-approved housing counseling agency. Some
lenders offering proprietary reverse mortgages also require
counseling. The counselor is required to explain the loan’s costs
and financial implications, and possible alternatives to a HECM,
like government and nonprofit programs or a single-purpose or
proprietary reverse mortgage. The counselor also should be able to
help you compare the costs of different types of reverse mortgages
and tell you how different payment options, fees, and other costs
affect the total cost of the loan over time. Most counseling
agencies charge around $125 for their services. The fee can be paid
from the loan proceeds, but you cannot be turned away if you can’t
afford the fee.”
What
A Reverse Mortgage Specialist Can Do For You: Reverse
Mortgage Specialists in your area can answer your questions,
calculate the amount of loan you can receive and advise the type of
loan for your needs. You can call us for a referral or a list of
Reverse Mortgage Specialists can be accessed at the National Care
Planning Council website. That website is not ours and we have no
control over it. So please note that, as always, we make no
representations, guarantees, or warranties about anyone or anything
that appears on anyone else’s website. Here is their link
Long
Term Care Link
