Reverse Mortgages

A reverse mortgage is a loan available for seniors wherein the payment stream is reversed. Rather than you paying the lender, the lender gives you monthly payments according the equity of your home. This tax-free income allows you to remain in your home without having to take out a conventional mortgage by slowly depleting the home's equity.

Am I eligible?

A reverse mortgage can enable you to stay in your home and pay off other debts. In order to qualify for a reverse mortgage, you must:

• Be at least 62 years of age
• Seek free financial counseling from a source that has been approved by HUD
• Be able to pay upfront costs of an insurance premium and an origination fee in addition to closing costs
• Use the reverse mortgage proceeds to pay off any existing mortgages and any additional personal funds

Just as you must qualify according to the above specifications, your home must also fall within certain requirements. In order to qualify for a reverse mortgage, your home must be one of the following:

• A single-family home
• A 2-4 unit property
• A manufactured home built after June 1976
• A condominium, or
• A townhouse

How does it work?

The proceeds you are eligible for is calculated according to your or the household's youngest spouse's age, your home's appraised value, current interest rates and the lending limit in your area of residence. You may receive monthly payments, a lump sum, a line of credit or a combination of these. Financial counseling from a HUD approved agency is mandatory to protect you and make sure that you know and understand your options and what the reverse mortgage entails. While a reverse mortgage is outstanding, no monthly payments are due and the loan is repaid when you cease to occupy the home.

What are the alternatives?

If a reverse mortgage is not the best match for you, you may want to consider a home equity loan or a no-interest loan or grant available through your county government or local nonprofit organization, which are often available to aid in necessary home repairs. A tax-deferral program may help with paying your property taxes. You may also want to consider alternatives to the reverse mortgage if you plan on leaving your home to your children, as oftentimes the home is sold back to the lender to pay back a reverse mortgage.

Do I really need this type of loan?

If you meet the above requirements and have personal debt or are finding that your monthly pension is not enough to cover daily living costs, then a reverse mortgage may be a viable solution. However, if you intend on leaving your home within the next 2-3 years, there may be less expensive options for you that do not require as high upfront costs as a reverse mortgage does.

Can I afford it?

Visit Reverse Mortgages for a calculator.