Reverse Mortgages

If you want to stay in your home as long as you can, but you need the equity in your home to pay your bills or just live better, then you may want to consider a Reverse Mortgage. A reverse mortgage is a program where the lender pay you, and in return would get re-reimbursed when you die or must leave your home.

Similar to the FHA program for home mortgages, the government will guarantee the monthly payments for reverse mortgages through its program called the Home Equity Conversion Mortgage (HECM). Because of the government backing, an HECM may be a safer option for homeowners. The HECM program requirements include:

  • The homeowner must be 62 or older.
  • No mortgages can be left on the home, except for a small amount that could be paid up front from the reverse mortgage.
  • The property must be a single family home, or a HUD approved condo.

To receive a reverse mortgage, you don’t have to qualify or prove income like you would with most mortgages. Instead, it is all about what the home is worth, your age and the current interest rates.

The value of a reverse mortgage is that the home is available for you to live in for free for the rest of your life or until you are unable or unwilling to stay in the home. Seniors need to have stability and piece of mind, and the reverse mortgage is a better choice than would be home equity loan if the homeowner lacks funds from other sources.

You have several choices as to how you might receive income:

  • Equal monthly payments.
  • Payments at the time and mount of your choosing – for owners who want a source of income if they need it.
  • A combination of the above.
  • A lump sum.

There are other choices top tap the equity in your home rather than a reverse mortgage. A home equity loan usually has lower costs, especially if you only plan on staying in your home for a few years. Reverse mortgages have some upfront costs just like any mortgage does.

Another choice for homeowners is to sell the home, and use the proceeds to buy a smaller home (or rent one), and use the proceeds to live on. Especially if you are an older senior, you’ll have to plan what you will do when you can not live in your home independently.