(This information is provided for informational purposes, Paramount Equity® does not offer reverse mortgages.)
By now, we’ve all seen the ads that feature happy, healthy seniors living fulfilling lives thanks to reverse mortgages. But what are reverse mortgages, and are they a good option for you? Since educating yourself is a great way to determine whether you should obtain a reverse mortgage, here’s a primer to get you started.
What is a Reverse Mortgage?
It’s a loan, usually for seniors and retirees, that uses your home’s equity as collateral. In a conventional loan, you make monthly payments to the bank, but in a reverse mortgage, the bank pays you. You can choose whether to receive this money in the form of monthly payments, one lump sum, a partial lump sum, or even a line of credit.
What are the Benefits of a Reverse Mortgage?
A reverse mortgage allows you to stay in your home and keep ownership of it.
• Greater Quality of Life
Instead of keeping money tied up in a house, you can access the equity when you need or want it. Any money that you receive from a reverse mortgage is yours free and clear; there are no restrictions on how to use it. For instance, some folks pay for basic necessities with these funds, while others indulge in luxuries that they can’t otherwise afford.
• No Payments to a Lender
Unlike a traditional mortgage, a reverse mortgage relieves you of the stress of regular payments to a bank or mortgage company. The loan only becomes due when you move, when you sell the house, or when the estate is settled after your passing.
Do I Qualify for a Reverse Mortgage?
The most common reverse mortgage today is the federally-insured Home Equity Conversion Mortgage. Eligibility requirements include the following:
• On the house’s title, the youngest owner listed must be at least 62 years old.
• The home to be used as collateral has to be your primary residence.
How Do I Pay Off a Reverse Mortgage?
The loan comes up for collection when any of these situations occurs:
• None of the borrowers have lived in the home for 12 months in a row
• All of the borrowers listed on the loan have passed away
• You sell the home
The reverse mortgage is usually paid off by the proceeds from selling the house. Since it’s a non-recourse loan, you and your heirs will never owe a greater amount than the price at which the home sells. If your heirs want to keep the home instead, then they’ll have to pay the loan using other proceeds. They usually are given a six month deadline to pay off the reverse mortgage regardless of whether they keep or sell the home.
Where Can I Learn More about Reverse Mortgages?
Click here to find a FHA-Approved Reverse Mortgage Lender.
Visit Paramount Equity® and talk to a Financial Specialist