What Is a Reverse Mortgage?
A reverse mortgage enables homeowners 62 and older to borrow against the equity in their homes without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you.
What are some Major Benefits of a Reverse Mortgage?
A reverse mortgage is a loan designed to allow seniors to maximize the equity in their homes by accessing flexible credit in unique ways that were not previously available.
The flexibility of the funding options for a Reverse Mortgage are tremendous. Money can be taken out up front in conjunction with an annuity. A key benefit is that the annuity is for your entire remaining life and the life of your surviving spouse, no matter how long you live, as long as both of you are on the loan. If a term-payment is selected, the borrower may outlive the benefits of the term payment. Alternatively, you can choose to start with an unused credit line that grows each year on a schedule and later choose to convert it into a lifetime annuity. The program options are flexible and the choice is yours.
A favorite benefit of a Reverse Mortgage is that it can be used as a planning vehicle to remove a homeowners’ monthly mortgage payment and replace it with a new income stream in the form of a monthly annuity. This provides a double benefit for the homeowner given it removes the monthly out of pocket expense of their current mortgage and replaces it with the addition of a monthly cash flow stream from the lifetime annuity. Note, if a term payment is selected, the borrower may outlive the benefits of the term payments.
A Reverse Mortgage also allows for access to credit that otherwise may not be available to a retired homeowner in the form of a minimally qualifying loan. Again, you may elect cash up front, a monthly annuity, an open ended credit line, or even a combination of these items. There are many benefits that can come from adding a Reverse Mortgage to your plan.
Why should I get a Reverse Mortgage?
A Reverse Mortgage should be considered a valuable retirement planning tool. A primary example is you can utilize the equity in your home to bridge your retirement income. Your equity is maximized because each year it grows with your eligibility as you age. You can choose to buy a new primary residence with a Reverse or you can pay off an existing mortgage where you are currently behind on payments and eliminate your mortgage payment all together. Your options are abundant.
A Reverse Mortgage never has a monthly mortgage payment for you to worry about and you can access flexible credit that you may not qualify for with a traditional home equity line at your local bank or credit union. Repayment is deferred until the borrower dies, sells the home, or defaults on obligatioins such as insurance or taxes. A Reverse Mortgage is a minimally-qualifying non-taxable source of income. The annuity stream provided by a Reverse Mortgage will continue as long as one borrower occupies the property as their primary residence.
Typically those who benefit most from a reverse mortgage are those who plan to stay in their homes over an extended period and have built a decent amount of equity in their homes. Also, the risk associated with a Reverse Mortgage is significantly lower than more traditional types of mortgages because you can never owe more than the value of your home. For a more comprehensive list of practical uses of a Reverse Mortgage see our Practical Applications page.
Contact one of our professionals today to find out if you have enough home equity to make a Reverse Mortgage a good decision for you. If you have a good amount of equity in your home and you plan on staying there for an extended period of time then a Reverse Mortgage might be right for you.
What are the Reverse Mortgage Requirements?
Qualifying is simple! If you own your home and are over 62 years of age you may be eligible for a Reverse Mortgage. You do not have to meet stringent traditional loan eligibility requirements to qualify for a Reverse Mortgage. It comes down to your age and your property. The home you are considering for a Reverse Mortgage must be your primary residence.
There are some requirements to what type of home may qualify:
Note: We also offer HECM Reverse Mortgages & Jumbo Reverse Mortgages for eligible owner occupied Mixed Use Properties and multi-unit 2-4 family properties with acceptable zoning. HECM Reverse Mortgages available in Virginia, Maryland, Florida & Pennsylvania. Jumbo Reverse Mortgages available in Virginia, Florida & Pennsylvania.
We can help you figure out if you meet the reverse mortgage eligibility requirements. Call and speak with a local Reverse Mortgage Specialist today! If you're ready to get started on a reverse mortgage apply now!
What are My Payment Options?
You can choose to receive the money from a reverse mortgage all at once as a lump sum, fixed monthly payments (for up to life ), as a line of credit, or a combination of these. The most popular option is the line of credit, which allows someone to draw on the loan proceeds when needed. If a term-payment is selected, a borrower may outlive the benefits of the term payment.
Are there restrictions on how I can use money received from a Reverse Mortgage?
Any proceeds from a Reverse Mortgage must first pay off any existing mortgages or liens on the property. After these and any other mandatory obligations are paid there are no restrictions on how you may use the proceeds. You can use the money you receive from your reverse mortgage any way you would like, everything from travel to medical bills, to paying down expensive credit card debt or to remodeling your home. You certainly do not have to spend all your eligible proceeds. Maybe you would just like to pay off a mortgage, establish a credit line as an emergency reserve, or even create a monthly annuity like payment to supplement your retirement income. There are no limits to how you can use your proceeds.
When does a Reverse Mortgage Loan come due?
Loan repayment is not due as long as you live in the home as your primary residence, continue to pay required property taxes and homeowners insurance, and maintain the home according to Federal Housing Administration requirements. In the event of death of one spouse the full benefit passes to the surviving spouse listed on the Reverse Mortgage and they do not have to sell the home or pay off the Reverse Mortgage unless they are forced to leave the home for a period in excess of twelve consecutive months. The surviving spouse must be named as a co-borrower on the loan in order access unused funds. Upon the passing of the surviving spouse or sale of the property due to change in circumstances, the FHA MIP insurance fund will insulate the estate of the deceased and the heirs from any loss.
What If There's An Existing Mortgage?
You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. However, the reverse mortgage must be in a first lien position, so any existing mortgage must be paid off with the reverse mortgage, or with savings.
For example, let's say you owe $100,000 on an existing mortgage. Based on your age, home value, and interest rates, you qualify for $125,000 under the reverse mortgage program. Under this scenario, you will be able to pay off ALL the existing mortgage and still have $25,000 left over to use as you wish. The amount of funds available to the borrower will be reduced by any costs financed by the loan.
If, however, you only qualify for $85,000, then you would need to come up with $15,000 from your savings to get the reverse mortgage. Even then, all the money from the reverse mortgage will have been used to pay off the existing mortgage. On the other hand, you won't have a monthly mortgage payment.
Apply Now to get started with your reverse application. Located in Fairfax County, helping many, 62 and older, with reverse mortgages in Virginia, Maryland, Florida and Pennsylvania.
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