Reverse mortgages (also called home equity conversion loans) enable elderly homeowners to tap into their equity without selling their home. The lender pays you money based on the equity you’ve accrued in your home; you receive a lump sum, a monthly payment or a line of credit. Repayment is not necessary until the borrower sells the property, moves into a retirement community or passes away. When you sell your home or no longer use it as your primary residence, you or your estate must repay the cash you received from the reverse mortgage plus interest and other finance charges to the lender.
Most reverse mortgages require you be at least 62 years of age, have a low or zero balance owed against your home and maintain the property as your principal residence.
Reverse mortgages are ideal for homeowners who are retired or no longer working and need to supplement their income. Interest rates can be fixed or adjustable and the money is nontaxable and does not interfere with Social Security or Medicare benefits. Your lender cannot take property away if you outlive your loan nor can you be forced to sell your home to pay off your loan even if the loan balance grows to exceed property value.
The Reverse Mortgage allows seniors to take equity from their homes with a decent interest rate and never requires a monthly payment. Here are 10 possible reasons why the Reverse Mortgage is a fantastic product for seniors and remains one of the safest products on the market:
1) Reverse Mortgages have no payments! The Reverse Mortgage is an equity loan that allows a senior to take up to sixty percent of the home’s value. However, the borrower is never required to make a monthly payment. Ever. This means that you will never default on the loan, and your home can never be foreclosed.
2) The Reverse Mortgage is 100% federally regulated. The department of Housing and Urban Development, or HUD, and the Federal Housing Administration, or FHA, has designed and regulated all HECM Reverse Mortgages. These are the most popular Reverse Mortgages. They have set closing costs, ownership rights, and interest rates to protect customers. These regulations apply to every lender.
3) The Reverse Mortgage is a loan designed to be non-Recourse. This means that the loan is secured against the value of the home and not against any other assets of your estate. A Reverse Mortgage can never be called and should something happen to lower the value of your home, the federal government protects the borrower with guarantee that they will not have to be responsible for any shortgage.
4) The Reverse Mortgage has no time limit. The loan will last as long as the home remains your primary residence. If the borrower decides to take a monthly payment with their funds, these payments can be arranged to continue to be paid every month until the borrower turns 150!
5) The Reverse Mortgage requires that every applicant receive Reverse Mortgage Counseling. This is a free service. It requires that every person who has a Reverse Mortgage, to first meet with a third party representative validated by the HUD and have their questions answered and made sure that they understand the process. It is a wonderful service and is mandatory for all applicants.
6) The Reverse Mortgage can have a low interest rate. One of the more popular types is the Home Equity Conversion Mortgage (HECM). It is an adjustable rate Reverse Mortgage. The rate is indexed to the U.S. Treasury Bond, NOT the stock market. There are fixed rate Reverse Mortgages, too.
7) The Reverse Mortgage is very conscious of all Homeowner’s Rights and seeks to protect them. A Reverse Mortgage allows you to remain in the home for the rest of your life.
8) The Reverse Mortgage has no income, credit, or health requirements. You will not need to have a certain credit score to get a Reverse Mortgage, nor will you need have any level of income. You will not have to have a physical or have any type of minimum health requirements. The loan is only based on the home and its equity.
9) The Reverse Mortgage is extremely flexible in providing you money. You can receive a lump sum, a line of credit, or a monthly payment. You can also receive a combination of any of these methods. You can use the funds for any purpose and the funds are 100% tax free!
10) The Reverse Mortgage can be a solution for expensive retirement and long term care. Most seniors did not plan for a recession, inflation, and low home values jeopardizing their retirement. The Reverse Mortgage is an extremely safe way to ensure that tightening costs and dangers of a longer retirement do not lower the value of living and enjoyment that seniors have earned.