Reverse Mortgage Facts

What’s the difference between a reverse mortgage and a bank home equity loan? 

With a traditional second mortgage or home equity line of credit, you must have a sufficient income to cover all debt payments and are required to make monthly mortgage payments. The reverse mortgage is available regardless of your current income. The amount you can borrow depends on your age, the current interest rates, the appraised value of your home and FHA’s lending limit. Generally, the more valuable your home is, the older you are, and the lower the interest rates are, the more you may borrow.

Does the bank own my home after I take out a reverse mortgage?

No. You own your home and retain title throughout the life of the reverse mortgage. You may paint, remodel or do anything you would normally do to your home if you didn’t have a reverse mortgage.

Are reverse mortgages only for desperate or cash strapped borrowers? 

No.  The reverse mortgage is an excellent financial planning tool that is used by homeowners from all walks of life. The product’s popularity has grown over the last couple of years. The introduction of the HECM Saver has opened up a new demographic of potential reverse mortgage customers.  

Does the bank sell the home when the reverse mortgage comes due?

When the loan comes due you or your heirs can either pay the balance due on the reverse mortgage with another mortgage or with other liquid assets. You or your heirs are also able to sell the home and use the proceeds to pay off the reverse mortgage. Generally the lender allows you up to a year to pay back the reverse mortgage. 

Can the lender take my home away if I outlive the equity in the home?

Absolutely not! As long as at least one of the borrowers resides in the property, keeps taxes and insurance current and keeps the home in good repair, there is no need to repay the reverse mortgage.

Will I still have an estate that I can leave to my heirs?

When you sell your home or no longer use it for your primary residence, you or your estate must repay the cash you received from the reverse mortgage, plus interest to the lender. The remaining equity in your home, if any, belongs to you or your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs.

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