Reverse Mortgage Basics
Reverse mortgages are often used to convert a part of the equity in your home into tax-exempt income (check with your tax advisor), without the need to sell your home, give up the title, or switch to another monthly mortgage payment plan. If you are age 62 or older you can apply for a reverse mortgage.
Through this mortgage program the lender pays you a lump sum amount. Makes fixed periodic (monthly) payments to you the homeowner, provides access to a line of credit, or even a combination of all three. You can use the money received to supplement your retirement income, pay for healthcare, or even go on a vacation! Here’s how reverse mortgages work:
Reverse Mortgage Qualifications
Reverse mortgages do require a credit check, income requirements, and an overall financial assessment, however, it is a completely different qualification than a regular, “forward” mortgage and is more lenient. Even if you still owe money on a first or second mortgage, you can still apply for this program with the possibility of it working for you. Today’s reverse mortgage would pay off all existing liens and takes primary lien position against your property. Please keep in mind that this program is only for your primary residence consisting of the following property types:
- One to Four-unit home
- Qualified townhouse
- Qualified Condominium
- Manufactured homes; only if they were constructed after June 1976 and are permanently fixed on to the ground- of which you are the owner
Value of the Reverse Mortgage
The amount of money available through a reverse mortgage depends directly on the age of the youngest borrower and is linked to the appraised value of your home. As a rule, the older you get, the more valuable your home becomes, the less money you owe on it and the more money you can access by virtue of reverse mortgages.
Implications of the Mortgage
The best feature of reverse mortgage funds is that they are tax-free (check with your tax advisor) and have no impact on your regular Social Security and Medicare Benefits. However, be careful of the mode of payment you choose. If you opt for a lump sum payment, it can affect the amount you receive later.
Any amount that you retain in each month after receiving the lump sum reverse mortgage payment counts as a resource. This resource can affect your Medicaid eligibility. It is best to consult reverse mortgage experts and your own Medicaid experts for all your reverse mortgages payment modes. You don’t want to jeopardize any current benefits that you receive.
When to Repay the Loan?
The loan, relating to reverse mortgages, shall be repaid at any time when you stop using your house as a principal residence. This happens when you sell the home, move out permanently or when you or your last remaining spouse passes away. Bear in mind that the amount you owe will never be greater than the value of your home. If it sells for less than the amount due, the FHA MIP insurance covers the difference. In the event the sales proceeds are greater than the amount owed in respect of reverse mortgages, the excess goes to you or your estate.
Consult with the Best!
Whenever you think about reverse mortgages, it is best to talk to a certified reverse mortgage professional or a counselor before making the final decision. At Aspire Home Mortgage, our licensed and experienced Certified Reverse Mortgage Professionals (C.R.M.P) offer the best advice – with respect to all your mortgage-related matters.
You can borrow with Confidence as NRMLA’s Certified Reverse Mortgage Professionals must adhere to the Code Of Ethics & Professional Responsibility which is a Pledge to Americas Seniors promising to serve them with integrity and transparency. As of September 2018, there are currently only 155 CRMP’s across the country.