What is a Reverse Mortgage?

A reverse mortgage is a home loan that allows homeowners 62 and older to withdraw some of their home equity and convert it into cash. You don’t have to pay taxes on the proceeds or make monthly mortgage payments.

You can use reverse mortgage proceeds however you like. They’re often earmarked for expenses such as:

  • Debt consolidation
  • Living expenses
  • Home improvements
  • Helping children with college
  • Buying another home that might better meet your needs as you age

    Two kinds of reverse mortgages

    The Federal Housing Administration insures two reverse mortgage types: adjustable-rate and a fixed-rate.

    1. Fixed-rate reverse mortgages consist of a one-time lump sum payment.

    2. Adjustables have five payment options:

    • Tenure: Set monthly payments so long as you or your eligible spouse remain in the home
    • Term: Set monthly payments for a fixed period
    • Line of credit: Unspecified payments when you need them, until you’ve exhausted your funds
    • Modified tenure: A line of credit and set monthly payments for as long as you or your eligible spouse live in the home
    • Modified term: A line of credit and set monthly payments for a fixed period of your choosing

Am I eligible for a reverse mortgage?

To apply for a reverse mortgage, you must meet the following FHA requirements:

  • You’re 62 or older
  • You and/or an eligible spouse — who must be named as such on the loan even if he or she is not a co-borrower — live in the home as your primary residence
  • You have no delinquent federal debts
  • You own your home outright or have a considerable amount of equity in it
  • You attend the mandatory counseling session with a home equity conversion mortgages (HECM) counselor approved by the Department of Housing and Urban Development
  • Your home meets all FHA property standards and flood requirements
  • You continue paying all property taxes, homeowners insurance and other household maintenance fees as long as you live in the home

Advantages of Reverse loans:

Your heirs won't have to repay the loan     
The loan gives you financial wiggle room    
An eligible surviving spouse can stay in the home     
Flexiablity to live your life

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