What is a Reverse Mortgage?
A reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash.
The product was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care. However, there is no restriction how reverse mortgage proceeds can be used.
The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.
The borrower is not required to pay back the loan until the home is sold or otherwise vacated. As long as the borrower lives in the home he or she is not required to make any monthly payments towards the loan balance. The borrower must remain current on property taxes, homeowners insurance and homeowners association dues (if applicable).
The fees for establishing a Reverse Mortgage are much higher than similar fees charged on a 'Traditional Mortgage', mostly due to the 'Mortgage Insurance' that is required by the lenders ( as well as other fees).
The Federal Government requires all prospective Reverse Mortgage Applicants to receives "Mortgage and Financial Counseling" prior to the completion of a Reverse Mortgage application.
While not the best financial tool for everyone, under the right set of circumstances, a reverse mortgage could allow an ailing senior to receive the healthcare they need while remaining within the home.
Note: This financial tool is not appropriate for all seniors. Please seek out professional advice prior to entering into any financial agreement.
Life Resource Planners of the Treasure Coast
772-567-7970 ext. 101
The information found on this website is gleaned from readily available public sources and is for educational purposes only. It is NOT to be considered financial or legal advice. Consult with an appropriate professional before making important financial or legal decisions.
Reverse Mortgages Explained
Deborah Nance does a nice job explaining a Reverse Mortgage