Table of Contents -Reverse Mortgage Information updated for 2018
A) Reverse mortgage basics B) Reverse mortgages how they work C) Information you need to know about reverse mortgages D) Reverse mortgage myths
A) Reverse mortgage basics
The HECM reverse mortgage is a way for seniors to release a portion of their equity without having to make monthly mortgage payments or without having to sell the home. The media has complicated the program and caused many misinformation to go public – the reality is this is a program that is backed by the Federal Housing Administration and some 100,000+ every year enjoy it.
Many seniors are being denied from a getting a regular forward mortgage such as a home equity loan HELOC or a cash out refinance, banks are currently tightening their lending requirements and it will be only possible for seniors to borrow for a mortgage with income and good credit scores. Qualifying wont be an issue compared to those other programs where income, credit scores, and assets are considered. Even if your home is paid off and you are able to afford a monthly mortgage payment there are many benefits which we will cover about taking a reverse loan.
With a reverse mortgage, being specifically designed for seniors, income and credit scores are not required, therefore many seniors are considering this as a option to get equity out of the home, some 80,000 seniors last year alone took this option for their retirement. Most importantly at today’s incredibly low mortgage rates, you can secure a fixed rate and eliminate a mortgage payment (or retire without a mandatory one). Interest rates wont stay this long forever – eventually rates will increase thus those who can qualify now should consider this option.
Who Can Qualify For a Reverse Mortgage?
- must be at least 62 years of age
- own a home (primary residence) **no investment homes or second homes**
- have equity in the property **equity is the difference between the value of the home and any outstanding mortgage debts**
- never have defaulted on any government debt
- lenders are now approved for financial underwriting ( they will consider your income, payment history, and credit scores in order for you to qualify )
Valid reverse mortgage information is hard to come by, therefore we have compiled the most accurate information for Seniors over the age of 62 who are considering a reverse mortgage for their retirement (every year there are at least 80,000 seniors choosing this option).
What Are the Benefits of Getting a Reverse Mortgage?
- keep ownership of the home
- if property values goes up that is your equity and not the banks
- you can live in the home without paying a mortgage
- you can live in the home – release equity – without selling – no other way to achieve this only with the HECM reverse
- you can sell or move if so desired at any time
- your income or proceeds will not be taxed
- you can live in the home for life without worrying about foreclosure ( seniors pay for taxes and insurance )
- government insured loan so you are safe – government caps the fees
- money is insured and always paid on time if you decide to receive lifetime monthly income (great option for those who need more income)
- receive a lump sum, or a credit line or lifetime monthly income too if so desired
- easy to qualify and no restrictions on how you spend the money
- currently we have an exclusive offer for a no origination fee no mortgage insurance premium HECM reverse mortgage)
- rates are incredibly low right now in 2017 – lowest they have ever been in history
Reverse Mortgage Disadvantages – this is a loan, therefore when both borrowers pass away or move homes they will pay the loan back, also not everyone qualifies only seniors, there has been an increase in scam so seniors should only work with FHA approved lenders. Starting in April 1st, 2013 – the HECM reverse mortgage will no longer be offered as a standard fixed rate.
B) How Does a Reverse Mortgage Work
By having equity in your home and by meeting the age requirement you will qualify for the HECM reverse mortgage, a federally insured mortgage program for seniors to be able to use their homes equity in retirement. This program is unique in that there is no need to sell your home – you keep ownership of the home – any current or future equity is your’s – but you have access to the funds – this way you can improve the quality of your retirement.
The more equity you have in the home and the older you are the more you will qualify to access with a reverse mortgage loan.
Equity is a simple to calculate, simply take how much the home is worth ( estimate home value ), and subtract it from any outstanding mortgages or property liens. EX: your home is worth $200,000 but you owe $50,000, therefore you have $150,000 available in equity, depending on your age, the bank would allow you to access up to 70% of that available equity.
C) Information on Reverse Mortgages
“Information is crucial for any senior considering a reverse mortgage loan, we encourage you to read and answer all your questions before deciding to take a HECM reverse mortgage.”
Out of All Reverse Mortgage Information Available We Still Get Many Confused Customer
Let us simplify all this information which is scattered on the web, and make sense out of this reverse mortgage program.
1.) Who Is A Reverse Mortgage For?
HECM ( Home Equity Conversion Mortgage) which is the formal name for a reverse mortgage is designed for those who are over the age of 62, who own a home that has some equity in it. If you need to pay for medical bills, loans, credit cards, the reverse loan can also help you by including this debt into the loan so you wont have payments. Are you are a senior who has no savings, you can take a lump sum to secure your future.
2.) What if i’m in a Bankruptcy or about to file?
We recommend you dealing with a real estate attorney and a bankruptcy attorney who can give you legal advice, depending on the chapter you file, you will be able to do a reverse mortgage.
We believe it is important for reverse mortgage borrowers to understand basic terms and how the program works before negotiating with lenders. We will assist you in educating you on everything there is to know about a reverse mortgage, then when you are ready we compare multiple offers to save you money and time.
3.) Do I need to have good credit score or a job to qualify?
You do not need to have a good credit score in order to qualify, it is not necessary, also income is not necessary for the reverse mortgage loan. Unlike traditional mortgages the reverse mortgage is designed for seniors and therefore the government has made it relatively easy for you to qualify.
4.) Who Owns the Home
You own the home and the title to the property just like you do with a regular mortgage. Again the Bank does not own your home, this is a misconception which is out there.
5.) Do I Have to Pay Monthly Payments
No, instead the bank will pay you, according to how you want to receive you loan. Remember this is a reverse mortgage, and this is the part that is reversed. You will never make another mortgage payment and the bank will start paying you.
6.) How Can I Receive My New Income/Funds/Proceeds?
You are able to select how you would like to get paid from the bank including but not limited to; monthly installments, upfront lump sum, credit line, or you can mix and match between choices.
7.) Do I have to Pay Taxes on the Income?
No, you will receive this income tax free, and tax deductions can be made when the loan comes due.
8.) When Does the Reverse Loan Come Due?
The reverse mortgage loan is due once both borrowers have left the property for 12 months at any time. The banks/lenders will give either you, your estate, or kids a few months in order to organize the the sale of the home or for a refinance. The bank/lender is only concerned at that time about the value of your home and making sure that the loan will be paid back.
9.) Can My Heirs Keep the Home?
Your heirs may keep the home, sell the home, really the home is your’s to decided what happens to it. It is very important that you have enough equity in the home as this creates more opportunities for cash out, refinancing, or selling for them.
Information on Reverse Mortgage
We love helping our clients understand the benefits and disadvantages of reverse mortgage loans. We believe in the reverse mortgage product, since it is currently helping so many seniors nationwide meet their retirement goals. Last year alone some 100,000 seniors received reverse mortgage to help their retirement finances.
There are changes coming to reverse mortgages this October and with the rocky economy we advise anyone who is considering a reverse to start learning and comparing offers now to receive the best deal. What would happen to your retirement if home prices keep dropping, or even what worse what would happen to your retirement if social security income stopped.
We will keep updating this page with the with crucial information covering the reverse mortgage topic as new info becomes available.