WHAT IS A REVERSE MORTGAGE?
A reverse mortgage is a unique loan program that enables senior homeowners that are age 62 and older to use their equity without creating a monthly payment obligation. The majority of our Reverse Mortgage Programs are guaranteed by the U.S. Government.
A reverse mortgage provides financial security because you do not have to make payments or repay the loan as long as you occupy your home as a primary residence.Thus, the reverse mortgage program enables seniors that may be "real estate rich and cash poor" to unlock the financial potential in their homes, and let their homes work for them. Additionally, the reverse mortgage has no income or credit requirements to qualify.
In general, the reverse mortgage does not become payable until the senior homeowner no longer occupies the property as his or her primary residence.
Thus, the reverse mortgage is simply a loan against the borrower's principal residence. The borrower retains ownership of the home. If the borrower decides to sell the property, any funds in excess of the payoff amount belong to the borrower, as is the case with a regular mortgage or home equity loan.
WHO IS ELIGIBLE FOR A REVERSE MORTGAGE?
Reverse mortgages are available to homeowners that are age 62 and older. All persons listed on the deed to the property must be at least age 62. The borrower must occupy the property as his or her primary residence and all existing liens must be paid off at the time of settlement. Thus, the proceeds of the reverse mortgage are available to pay off any outstanding mortgages against the property. As an additional safeguard, the Department of Housing and Urban Development (HUD) requires that each potential reverse mortgage borrower be advised about the reverse mortgage program by an independent HUD-approved counseling agency. This counseling is free of charge to the borrower.
How Does a Reverse Mortgage Differ From A Home Equity Loan?
While both reverse mortgages and home equity loans enable senior homeowners to turn the equity in their home into spendable dollars, there are important differences between these two types of mortgages.
First, home equity loans require regular monthly payments in order to repay the loan. These payments begin as soon as the loan is settled. In contrast, a reverse mortgage does not have to be repaid as long as the home remains the senior's primary residence. In other words, the loan becomes due only when the senior no longer occupies the property.
Second, home equity loans are based on the borrower's income and credit history. A home equity loan borrower may be required to requalify for the home equity loan after the fixed loan term expires (usually 10-15 years). If the borrower does not qualify, then the lender may require that the loan be paid in full immediately. However, income and credit are not obstacles for seniors who want a reverse mortgage because there are absolutely no income or credit requirements to qualify. It should also be noted that there are no requalification requirements.
What Are Some of the Common Uses Of Reverse Mortgages?
• Pay off existing mortgages
• Free up monthly income
• Do home improvements
• Pay off credit card debts
• Pay for in-home health care
• Purchase long-term care insurance
• Supplement income
• Plan your estate
• Purchase a car
• Travel
• Prepare for emergencies
• College tuition for grandchildren
• Anything you want! The possibilities are endless!
A reverse mortgage borrower has only two (2) responsibilities:
• Occupy the property as his or her primary residence
• Maintain homeowner's insurance and pay all real estate property taxes on the property.
Thus in general, as long as the borrower can satisfy these requirements, the borrower will NEVER be forced to sell or vacate the property. Accordingly, even if the mortgage balance exceeds the property value, or if the borrower has exhausted all of the available funds, the borrower can NEVER be forced to sell the home
Additionally, when the loan does finally become due, the reverse mortgage lender is only secured to the real property. Thus, the lender can only look to the value of the real estate for repayment of the reverse mortgage and not any other asset in the borrower's estate. Furthermore, neither the borrower nor the borrower's estate will be subject to any claim that may arise if the value of the property is less than the payoff of the reverse mortgage. FHA mortgage insurance will cover any balance due the lender.
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