Reverse Mortgages are a new form of mortgages designed to help senior homeowners age 62 and older. They are good for seniors with a low or fixed income as well as those in higher income brackets. A Reverse Mortgage enables seniors to tap into their home equity without the burden of making monthly payments like a regular mortgage. The seniors never have to make mortgage payments as long as they live in their homes, and they are allowed to be out of their homes for up to 12 months.
BENEFITS: One of the most important benefits is there is safety for the seniors with Reverse Mortgages because they are federally funded and regulated. The senior retains ownership of their home. The money is tax free, and it does not affect social security, Medicare, or Medicaid. The loan can improve their quality of life as well as providing security for them. The loan reduces the burden on the senior’s children while it can maximize legacy asset transfer to their heirs. There is guaranteed monthly income for life (with the monthly payment option). The loan is figured on the senior living to be 100 years old. If the senior lives to be over 100 years old, the monthly benefits continue until the senior is out of the home more than 12 months or passes away.
QUALIFIYING: Reverse Mortgages are very easy to obtain. To qualify for a Reverse Mortgage, the senior must be a homeowner over 62 years old and have some equity in their home. The older the senior and the more equity in the home will give the greater amount of money to the senior. Seniors do not have to show any income to qualify or even have good credit. All they need is equity in their home.
APPLICATION: The application process is very easy. It is a similar process as when they purchased or refinance the home, except they must go thru a 30-40 minute phone counseling educational session to make sure they understand the process and that they retain the Title to the home.
THE MONEY: The money is tax-free. The money from the loan can be paid to the seniors in a lump sum, a credit line, monthly, or a combination of the above. Once the loan is in place, the seniors may change the payout method anytime they wish. Most seniors take the credit line option because the money accrues interest at the same rate as the actual loan interest. Many seniors take the credit line option, and they do not spend any of the money. This way the house that was just sitting there not collecting interest, now becomes a liquid asset like a savings account.
COMMON USES: The money from a Reverse Mortgage can be used in any way the senior wishes. The money is typically used for augmenting their monthly income, home repair or maintenance, paying off existing debt, helping their children or grandchildren, buying a second home or recreational vehicle, travel, gifts, investing, or retirement. Other seniors use the money for medical bills, long-term health care, life insurance, medical bills, or prescription drugs.
PAYING OFF THE LOAN: The senior retains the Title to their home. When the senior passes, their heirs make the decision to refinance the home or sell it, and they keep the remaining equity in the home. The loan is figured so there is approximately the same amount of equity that is owed on the Reverse Mortgage at the end of the mortgage as there was at the beginning of the loan. There would be even more equity in areas where the property appreciation is greater than 4% (Washington properties are now appreciating at 9.8% in some areas).