Reverse Mortgages: How they work

The following has been provided by Judy Schwartz, an expert on reverse mortgages:  http://www.reversemortgagesonly.com

Thank you Judy for the great information.

If you’d like to explore if a reverse mortgage is right for you or your parent/s please get in touch with me &/or Judy.

Reverse Mortgages:  How they work

A Reverse mortgage is a financial tool

– a loan – to allow homeowners 62 and older, to access a portion of the equity in your home, without selling your home, giving up ownership or making monthly payments. Rather than paying money into your home, your home pays YOU money, releasing some of the equity that you have built up over the years.

You may still qualify if you currently have another loan on the home. But a Reverse Mortgage requires you to pay off any existing mortgages before providing additional cash to you.

The loan is NOT made based on your credit score, income, net worth or assets…ONLY your age and the condition (and resulting appraised value) of your property. It is your home that “qualifies”, not you.

The money available to you depends on four factors: 1) the age of the youngest borrower on title to the home. 2) the interest rate for the type of loan requested. 3) the lesser of the appraised value of your home or 4) the national lending limit currently set at $625,500

If you are 92 years old, you will qualify for more than if you are just 62 years old

The available loan proceeds can be paid to you in a lump sum, fixed amount per month (“term”), equal monthly payment for as long as you occupy your home (“tenure”), line of credit (to withdraw money on an as-needed basis), or a combination of these choices. It is always your home – the title always remains in your name. You make no payment while living in the home. Instead, interest is added to the loan and paid when you sell o move out of the home.

That is, the loan is due and payable when the last person on the title to the home leaves the property or passes away. If the property is bequeathed, your heirs can either sell the home or refinance the home and pay off the mortgage.

Presently, Reverse Mortgages are available under the Home Equity Conversion Mortgage (HECM) program. This program is backed by the US Department of Housing and Urban Development (HUD) and is insured by the Federal Housing Administration.

Within the HECM offering, there are two families of Reverse Mortgages: 1) those based upon an adjustable interest rate and 2) those based upon a fixed interest rate. To determine which one may be right for you, there are many considerations include your age, the amount of money you may need to access, the value of your property, your risk tolerance, and more.

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