10 Essential Facts About Reverse Mortgages

Reverse mortgages can be a source of confusion with all the conflicting information out there. Whether you're considering one or simply exploring options, understanding reverse mortgages can be daunting. This post aims to clear the confusion by presenting ten essential facts about reverse mortgages.

1. Reverse Mortgages Use Your Home’s Equity

Reverse mortgages allow you to borrow against your home's equity. The lender recoups these funds when the house is sold, the homeowner moves, or passes away. It's a way to generate income in retirement without monthly mortgage payments.

2. Choose How to Receive Your Money

You have options: take the funds as a lump sum or receive them in monthly installments. A lump sum could be beneficial for paying large expenses, whereas monthly payments might help manage day-to-day living costs.

3. Types of Reverse Mortgages

There are three types: home equity conversion mortgages (HECMs), single-purpose reverse mortgages, and proprietary reverse mortgages. HECMs are the most popular due to their flexibility for any purpose.

4. You Still Need to Pay Property Taxes and Insurance

It’s crucial to stay up-to-date with your property taxes and insurance. Lenders require you to maintain these payments to keep the mortgage agreement.

5. Your Home Must Be Your Primary Residence

A reverse mortgage requires that the home is your primary residence. Extended absences might trigger an earlier repayment.

6. You Will Still Own Your Home

Rest assured, you retain homeownership with a reverse mortgage. The title remains in your name, not the lender's.

7. No Monthly Mortgage Payments

A significant advantage is the absence of monthly mortgage payments, which can be a relief for retirees or individuals on fixed incomes.

8. Federal Debt Delinquencies Can Disqualify You

Be aware that delinquencies on federal debts, such as taxes or federal loans, might disqualify you from obtaining a reverse mortgage.

9. You Must Have Paid Off (or Nearly Paid Off) Your Home

To qualify, you typically need substantial equity, meaning your home is fully or almost fully paid off.

10. Age Requirement: 62 Years or Older

These loans are specifically for individuals aged 62 and older. If you're under 62, consider alternatives like a home equity line of credit (HELOC).

Reverse mortgages can be a valuable tool but understanding them fully is crucial before proceeding. Now that you’re armed with these facts, you can better assess whether this financial option aligns with your needs.

Get in touch today to explore if a reverse mortgage fits your situation. Consulting a financial advisor or mortgage specialist can provide you with expert guidance and personalized advice.