What is a Reverse Mortgage?

A reverse mortgage is a unique loan that enables homeowners who are 62 and older to convert part of the equity in their homes into income without having to sell the home, give up title, or take on new monthly mortgage payments. Funds obtained from the reverse mortgage are tax-free (consult a tax advisor) and borrowers can choose to receive reverse mortgage funds as a lump sum, monthly income, line of credit or a combination. Borrowers can use the funds any way they wish.

Benefits:

• You can live in your home as long as you wish.

• Eliminates monthly mortgage payments

• No credit requirements

• No income qualifications

• The money you receive is tax free (consult your tax advisor)

• You can use the money for any purpose

• You retain title to your home

• The loan is federally insured (HECM)

Can a reverse mortgage be taken out if there is already a conventional mortgage on the home?

Yes, but existing mortgages must be paid off at closing. The proceeds from the reverse mortgage may be used for that purpose. This eliminates a monthly mortgage payment.

What about a home in a “living trust”?

A homeowner who has put their home in a living trust can usually take out a reverse mortgage, subject to a review of the trust documents.

Will I have any tax liability for the reverse mortgage proceeds?

Currently the Internal Revenue Service treats monies received from a reverse mortgage to be loan advances and not taxable income. (Consult your tax advisor)

How do the monies from a reverse mortgage affect Social Security and Medicare?

The proceeds from a reverse mortgage generally do not affect these benefits. (Consult appropriate government agencies)

Does the lender take the house?

No, a reverse mortgage is merely a loan against the property. The title remains in the name of the borrower and the lender is only repaid the loan balance.

What if I owe more than my home is worth?

All reverse mortgages are non-recourse which means the borrower can never owe more than the value of the home regardless of the loan balance.

When does the loan become due and payable?

The reverse mortgage is due and payable when the borrower sells the property, permanently leaves the home, or passes away. In the case of a couple, it is the second to move out or die that triggers repayment. Until these events take place you live in the home and make no payment to the lender.

Do I or my heirs have to sell the property to repay the loan?

No, repayment can be accomplished by refinancing the existing reverse mortgage with a conventional mortgage loan.

What qualifications are necessary for a reverse mortgage?

All borrowers must be 62 or older and have sufficient equity in the home. There are no credit requirements or income qualifications.

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