What is a Reverse Mortgage?
A reverse mortgage is a unique program that allows homeowners 62 years of age or older to access the equity in their homes to help with financial stability later in life. Some lenders offer their own reverse mortgages, but there is only one that is federally insured by the U.S. Government. That is the Home Equity Conversion Mortgage, or HECM. This is the safest reverse mortgage option and the one discussed in this brochure.
Why Choose a Reverse Mortgage?
A reverse mortgage can:
- Eliminate monthly mortgage payments
- Keep a homeowner in their home following a loss of income or the death of a spouse
- Provide a regular flow of tax-free money to boost retirement income
- Access cash to invest, make a large purchase, or achieve other financial goals
- Pay for long-term care
- Fund emergency expenses
Who is Eligible for a Reverse Mortgage?
To quality for an HECM reverse mortgage, borrowers must:
- Be 62 years of age or older
- Have significant equity in their home
- Live in the property as their primary residence
- Be financially able to pay property taxes, homeowner’s insurance, HOA dues, and maintain the property
- Have no delinquent federal debt
- Attend a consumer information session by a HUD-approved counselor
The property used to secure the loan must be a single-family home, a 2- or 4-unit property occupied by the borrower, FHA-approved manufactured home, or FHA-approved condominium.
Homeowners choose a reverse mortgage for many reasons, but these four reasons rise to the top.
Tax-Free Money: Home equity accessed through a reverse mortgage is not taxable. Whether the money is distributed in a lump sum or through a monthly disbursement, the cash is tax-free.
No Mortgage Payments: No payments are required until the borrower passes away or vacates the property. This sets the reverse mortgage apart from other types of home equity loans or lines of credit, which have a repayment requirement.
Keep the Title of Their Home: Homeowners continue to own their home, with full title and control of the property just like any other forward mortgage.
Protect the Remaining Estate: Even if home values fall, an HECM reverse mortgage is protected from going upside-down. This means that the borrower (or their estate) will never be required to pay back more than the home is worth. This also contrasts with traditional home equity loans, where the entire balance remains due even if a home’s value plummets.
If you have any interest in a casual conversation with one of our local Reverse Specialists, please call 206-766-8888 and hit Option #2 or complete the form below to schedule a free consultation.
