Reverse Mortgages

For Reverse Mortgage Myths, Click Here. Also, How Does it Affect Children or Heirs: Click Here.

Reverse mortgages are popular among seniors and retirees as a way to supplement their income and allow them to live comfortably through their retirement.

What Is a Reverse Mortgage?

A reverse mortgage is easier to understand if you compare it to a traditional “forward mortgage”. A forward mortgage is what you use to buy a home. Debt is created against your home when you receive money for the loan and you pay money to a lender to decrease that debt. As time goes on, your debt decreases and your equity increases.

A reverse mortgage works just the opposite. You receive money using the equity from your home and you don’t have to make monthly payments. As time goes on, your debt increases and your equity decreases.

Who Qualifies?

To qualify for a reverse mortgage, you must be 62 years old or more, you must have equity in your home and the home must be your primary residence. There are no income, employment or credit qualifications.

The Facts

The amount you receive depends on your age and the value of the home. The older you are, the more money you’ll get from the reverse mortgage. The debt you owe equals all the loan advances you receive. In addition, interest will be added to your loan balance.

You can draw your money by receiving it in a lump sum, as a monthly cash advance, as a credit line type of account, or as a combination of these methods.

The fees that are charged on a reverse mortgage can be paid for with the money you receive from the loan. This is called “financing” the loan costs. However, since you are still the homeowner, you are still responsible for paying property taxes and home insurance.

Your reverse mortgage will become due and payable when the last surviving mortgage holder permanently moves out, sells the home or dies.