Reverse Mortgages
What is a reverse mortgage?
A Reverse Mortgage is a home loan (used for any purpose) where seniors, 62 and older, can access the equity (cash) accumulated in their home.
There are several different reverse mortgage programs. Fannie Mae Home KeeperŽ, Jumbo Cash-Out loan, and the most popular, HUD-insured Home Equity Conversion Mortgage (HECM) are three such programs.
Why is it called a Reverse Mortgage?
It is called a reverse mortgage because instead of you making payments to the lender like with a traditional (forward) mortgage, a Reverse Mortgage allows you to borrow money or pay off your existing mortgage without the responsibility of having to make regular monthly payments. With a reverse mortgage YOU get paid either with regular monthly installments, or through use of a credit line. The choice is yours.
Am I signing over my house to the bank?
This is probably the most common misconception about this program. A reverse mortgage is a loan, nothing more. You continue to own your home just as you always have. Title does not change hands. You can sell it when you want or stay forever, the choice is yours.
Is it too good to be true? How does the lender get paid?
Of course, the lender is in business to make money. Interest is still accruing on a reverse mortgage, but it all gets paid back when the loan is paid off; allowing you to live payment free as long as the loan is in place.
When does it get paid off?
A reverse mortgage only has to be paid off when you permanently leave the home. It gets paid the same way all other mortgages are paid off. When the house is sold, the balance due is paid to the lender and you or your heirs keep the difference.
What are some of the benefits of a reverse mortgage?
- Personal and financial independence.
- Pay for health care or other needs.
- Pay for needed Home Improvements.
- You can never lose your home as long as you maintain the property tax and insurance payments.
- The loan is only paid off when the house is sold by you or your heirs, or all borrowers move out of the house.
- Keep your Medicare or Social Security benefits.
- Use it as a credit line and draw upon it as needed.
- Get all your cash right away.
- Get the best of both—get cash now and have a balance in reserve to use as a credit line.
- No Income Requirements: The homeowner does not need to be working and is not qualified based on income.
Here's how it works...
As you receive monthly cash income, the loan balance increases. In the following twelve-month example, you begin with a balance of zero in the first month. As you withdraw money from the loan , the balance grows. By the end of month twelve, the balance would be $6,000 plus $232.44 interest. None of it, the interest or the principal balance gets paid back until you permanently leave the home. You retain title and ownership to your home the whole time.
Assumptions*
| Regular monthly advances |
$500 |
| Annual interest rate |
7.0 % |
| Monthly interest rate |
.583% (.07 / 12) |
| 0 |
0 |
0.00 |
0.00 |
$500.00 |
| 1 |
$500.00 |
$2.92 |
$502.92 |
$500.00 |
| 2 |
$1,002.92 |
$5.85 |
$1,008.77 |
$500.00 |
| 3 |
$1,508.77 |
$8.80 |
$1,517.57 |
$500.00 |
| 4 |
$2,017.57 |
$11.77 |
$2,029.34 |
$500.00 |
| 5 |
$2,529.34 |
$14.75 |
$2,544.09 |
$500.00 |
| 6 |
$3,044.09 |
$17.76 |
$3,061.85 |
$500.00 |
| 7 |
$3,561.85 |
$20.78 |
$3,582.63 |
$500.00 |
| 8 |
$4,082.63 |
$23.82 |
$4,106.44 |
$500.00 |
| 9 |
$4,606.44 |
$26.87 |
$4,633.31 |
$500.00 |
| 10 |
$5,133.31 |
$29.94 |
$5,163.26 |
$500.00 |
| 11 |
$5,663.26 |
$33.04 |
$5,696.29 |
$500.00 |
| 12 |
$6,196.29 |
$36.15 |
$6,232.44 |
$500.00 |
*Many criteria are considered when determining the reverse mortgage loan amount, interest rate, etc.
Want more information?
Our Reverse Mortgage counselors are happy to answer any questions and are available by phone during regular business hours. You can reach us locally in Maryland at 410-902-4660 or toll-free nationwide at 888-562-6510.
To request more information and a FREE DVD.
CLICK HERE!
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