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A reverse mortgage is a special type of home loan available to senior citizens that allows the homeowner to convert a portion of the equity in their home into cash. The homeowner does not have to pay back the loan as long as they maintain residence. Repayment is not required until the homeowner passes away or no uses the home as their primary residence.
To qualify for a reverse mortgage, the homeowner must be at least 62 years of age and own their home outright or have a low mortgage balance that can be paid off with proceeds from the reverse mortgage. There are no minimum income or credit requirements in obtaining a reverse mortgage.
The amount of money that a homeowner can receive from a reverse mortgage depends on age, appraised value of the home and the starting interest rate. The borrower has several payment options:
Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term- equal monthly payments for a fixed period of equal monthly payments for a fixed period of months
Selected.Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted.
Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
The money received is not taxable and does not affect Social Security or Medicare Benefits.
The loan ends when the homeowner passes away, sells their home or moves out of the house permanently. Proceeds from the sale of the house are used to pay off the reverse mortgage with any additional proceeds over the loan amount going to the homeowner. In cases where the homeowner is deceased, the heirs receive the difference. If the proceeds are not sufficient to pay off the loan, then the lender (or the lender's insurance) makes up the difference.
Senior citizens who own their home outright or have a very low mortgage balance might consider a reverse mortgage as a sensible financial option.
Home Mortgage Loan