Reverse
Mortgage

Your Ultimate Retirement Tool

When you hear the term reverse mortgage, you’re probably left feeling a little bit confused as to how something like that even works. We’re here to help provide you clarity and explain how this type of mortgage can be beneficial for people who already own a home and want to access the equity they’ve built in it. Below, we’ll go into detail about what a reverse mortgage is, how it works, and whether it’s a good option for you.

What exactly is a reverse mortgage?

A reverse mortgage is a unique home equity loan that is available for homeowners aged 55 and older who have sufficient value built up in their property. Basically, a reverse mortgage gives seniors the opportunity to borrow a portion of their home’s equity with no monthly mortgage payment. The money you receive from a reverse mortgage is non-taxable and can be used however you wish.

Is it really worth it?

Reverse mortgages are particularly desirable for people interested in augmenting their retirement income. It’s yours to do with as you please, but in most cases the money received is used to finance home repairs or pay off an existing mortgage.

 

How do I get the money from a reverse mortgage?

You have three choices as to how you’ll receive the cash in a reverse mortgage: as a lump sum, through a monthly payment, or on a credit line.

 

 

Can I get out of a reverse mortgage if I decide I no longer want it?

If you borrowed money using a reverse mortgage, you’re able to pay it off any time without penalty. To do this, you can either pay your lender directly or sell your home. If you’re thinking about getting a reverse mortgage, you should carefully consider your future plans. For example, if you plan on staying in your home for a while, a reverse mortgage might be sensible; however, if you plan on moving in the next few years, then you should probably hold off.

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How much can I get from a reverse mortgage?

This depends on several factors, such as your age, the type of program, the value of your home, and the interest rate. As an example, a 62-year-old homeowner will generally be eligible for a reverse mortgage loan for approximately 50 percent of the home’s total value.

 

Are there any special requirements to qualify for a reverse mortgage?

Yes. They are as follows:

  • You must be 55 years or older. In the case of a married couple, one spouse must be 55 or above.
  • The home to be reverse-mortgaged must be your primary residence.
  • You must have sufficient equity: you will not qualify if the amount you owe on an existing mortgage exceeds the amount you intend to borrow.
  • The property must pass an appraisal. If repairs are required, they may need to be addressed prior to closing.

How do I know if my home qualifies?

The types of properties that are eligible for a reverse mortgage include single-family homes, properties with 2 to 4 units, manufactured homes built after June of 1976, condominiums, and townhouses.

What if I already have a mortgage?

People who already have a mortgage can still qualify for a reverse mortgage, but any existing debt must be paid off. For example, if you owe $50,000 on your existing mortgage and qualify for a $75,000 reverse mortgage, you can pay off the existing mortgage amount and still have $25,000 left over.

How much equity do I need in order to qualify?

The equity you need for a reverse mortgage depends on a few factors, starting with your age, the interest rate that’s offered, and the value of the home. On average, a 62-year-old will need to have home equity between 50 and 60 percent.

 

What will happen to my reverse mortgage when I die?

Should the borrower of a reverse mortgage pass away, the heir or beneficiary will be given ample time to decide what they would like to do with the property. During this period, no payments will be required. If the heir or beneficiary intends to keep the home, they can pay off the balance with cash or by refinancing. Most of the time, the heir will sell the home and take the remaining equity. If the loan amount exceeds the value of the home, the heir will have the option to walk away without penalty.