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Reverse Mortgage

11/28/2017
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A reverse mortgage loan is a type of loan available to seniors (62 and over), used as a way of converting their home equity (the value of the home, minus the amount of mortgages) into cash payments
while retaining ownership of the property.

 
 

To qualify for a reverse mortgage loan
in the United States

the borrower must be at least 62 and be able to pay off an existing mortgage with the proceeds from the reverse mortgage loan and if needed, additional personal funds.

The amount any individual homeowner is eligible for depends on their age, the Federal Housing Administration (FHA) or Fannie Mae (FNMA) appraised value of the home and the starting rate effective upon closing. The location of the home may also have an impact. There is also a type of reverse mortgage for homes valued over the maximum Fannie Mae limit.

 

Reverse mortgages allow the home owner to continue living in the home, and allows repayment of the loan to be deferred until the borrower is no longer living in the home.

In the United States, the proceeds of the reverse mortgage loan are tax-free, there are no minimum income or credit requirements, and for most reverse mortgages, the money can be used for any purpose.
Income and credit ratings are not considered by lenders when granting reverse mortgages, notwithstanding a bankruptcy that has not been resolved. The majority of reverse mortgages are FHA insured.

In a reverse mortgage in the U.S., a borrower can be paid in a lump sum, in monthly advances (payments, through a growing line of credit, or a combination of all three.

The reverse mortgage loan advances are not taxable and do not affect Social Security or Medicare benefits, although Medicaid and SSI benefits may be impacted.

The cost of a reverse mortgage exceeds the costs of other types of loans. However, in some cases the costs may be less than or the same as the cost of selling a home and moving.

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