A reverse mortgage is a type of loan available to homeowners aged 62 and older. It let’s you convert a portion of your home’s equity into cash. Unlike a traditional mortgage where you borrow money and pay it back with a monthly payment, a reverse mortgage pays the homeowner – monthly or in a lump sum. The loan is repaid when the homeowner is no longer in the house. A reverse mortgage is not right for every situation and not everyone will qualify for it. You will meet with a reverse mortgage counselor before being approved for one.
What Can You Use The Money For?
- Pay off debt
- Fund medical bills
Interesting and Important Information:
- The monthly payments are usually tax-free
- The reverse mortgage shouldn’t affect Medicare or Social Security Benefits
- The reverse mortgage can make you ineligible for need-based governmental programs such as Supplemental Security Income
- The loan typically doesn’t have to be repaid until 6 months after the the last surviving borrower dies, sells the home, or no longer uses the home as a primary residence
- Your home must be owned outright or have significant equity
- You must be 62-year old or older
- The property must meet FHA property standards
- You cannot be delinquent on federal debt (taxes, etc)
- You must own your home as your primary residence
- You must continue to pay insurance, taxes, utilities, and maintenance on the property
- There are closing costs and servicing fees over the course of the loan
- You cannot deduct the interest on your income taxes
- Interest is added onto the balance each month and the amount you owe to pay back increases over the life of the loan
- Heirs will have to pay back the loan in full or 95% of your home’s appraised value (whichever is less)
Contact me, your Senior Real Estate Specialist for more information.