Reverse Mortgages 101
If you are over 62 years old and own a majority portion of your home’s value you may qualify for a reverse mortgage. These mortgages can be used to leverage the equity in your home for your personal use. The value that currently is present in your home can become useful in your hands to increase your quality of life, retirement plans or home upkeep needs.
The HECM allows home-owners, ages 62 and better, to convert part of their home equity into useable proceeds. There are no required monthly mortgage payments on a HECM but the homeowner must continue to pay for property taxes, insurance and any other required assessments. There is no pre-payment penalty if the consumer ever chooses to pay the loan back in full. Repayment of the loan can never exceed the home’s value and the heirs will never inherit a debt. The heirs may choose to purchase the home and would payoff the existing reverse mortgage through a refinance. The borrowers always retain title to the home and no repayment is required until the they either permanently leave the home, fail to maintain the property or fail to pay the property taxes and insurance.
Because the proceeds are a tax-free* loan, there is no effect on Social Security or Medicare benefits, however, income-based programs may view the HECM as an addition cash flow source. Therefore, it is always best to consult an advisor when receiving benefits from an income-based program before pursuing the HECM.
The loan amount of the HECM is based on the age of the youngest borrower, the home value, and current interest rates. Borrowers must attend HUD-certified counseling prior to applying for a HECM loan.
*Not tax advice, consult a tax professional
What is a Reverse Mortgage?
The Reverse Mortgage is a special type of home loan that allows a homeowner to convert a portion of the home’s equity into a useable amount of proceeds for the senior’s needs. You are able to tap into your equity and make it work for you. Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence or the property is sold. HUD’s reverse mortgage provides benefits, and it is federally-insured (FHA) as well. With over 12 years of experience in originating Reverse Mortgages, Eva Cutler can make your experience a good one. Contact Covenant Reverse Mortgage today for answers to all your questions, for any information you need on pros and cons, to purchase a home with Reverse Mortgage, find out age requirements, or anything else on the federally insured by HUD Reverse Mortgage program.
Advantages of Reverse Mortgages
It doesn’t require monthly mortgage payments, but borrowers do have to pay their homeowners insurance and taxes and maintain their home. The loan is repaid after the borrower dies or moves out and the property is sold. Borrowers can get the money from the reverse mortgage loan in one lump sum, as a line of credit, or get it paid out monthly.
How to Qualify for a Reverse Mortgage
The basic requirements to qualify for a reverse mortgage loan include: the youngest borrower on title must be at least 62 years old or with some programs now available 60 years old , live in the home as their primary residence and have sufficient home equity. Borrowers must also meet financial eligibility criteria as established by HUD. There is an exception to the 62 year age guideline applies to some of the proprietary jumbo products being offered. Check with Covenant Reverse Mortgage/Eva Cutler today to find out where you fit!
How much can I get with a Reverse Mortgage?
The amount of money you can access depends on how much home equity you have available and what your property appraises for and of course your age. Good news is the maximum amount anyone can use of their home value for a reverse mortgage is $765,600. Any required payoffs or liens on the property must be taken into consideration and paid. You will want to give Eva a call to inquire about the jumbo Reverse Mortgage products available if your home value is over the current HECM standard allotment.