The following has been provided by Judy Schwartz, an expert on reverse mortgages.
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 and/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 their home, without selling the 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 even if you currently have another loan on the home. However, 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:
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The age of the youngest borrower on the title to the home
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The interest rate for the type of loan requested
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The lesser of the appraised value of your home or
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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.
Payout Options
The available loan proceeds can be paid to you as:
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A lump sum
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Fixed monthly payments (“term”)
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Equal monthly payments for as long as you occupy your home (“tenure”)
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A line of credit (withdraw money as needed)
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Or a combination of the above
Ownership & Repayment
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It is always your home – the title remains in your name.
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You make no payments while living in the home.
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Instead, interest is added to the loan and paid when you sell or move out of the home.
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The loan becomes due and payable when the last person on the title leaves the property or passes away.
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If the property is inherited, your heirs can either sell the home or refinance and pay off the mortgage.
Government-Backed Programs
Currently, Reverse Mortgages are available under the Home Equity Conversion Mortgage (HECM) program. This program is:
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Backed by the U.S. Department of Housing and Urban Development (HUD)
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Insured by the Federal Housing Administration (FHA)
There are two types of HECM loans:
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Based on an adjustable interest rate
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Based on a fixed interest rate
To determine which one is right for you, consider your age, cash needs, home value, risk tolerance, and more.
Posted by: Cheryl Bower, REALTOR® CRS, GRI, ABR, ePro
📱 Cell/Text: (415) 999-3450
📄 DRE #: 01505551
🏡 Zephyr Real Estate
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