Reverse Mortgage Program
A reverse mortgage is a type of home loan that allows homeowners ages 62 and older to borrow against part of their home’s equity. Not many people realize that a reverse mortgage can also be used to buy a new home.
Indications - this program is a good choice for:
- Increase their incomes and remain in their homes.
- Allow seniors to supplement their income in retirement by tapping part of the equity they've built up in their homes.
- Allows seniors to buy their retirement home and use their reverse mortgage proceeds to finance a portion of the home and use the remaining funds as they choose.
What are the benefits?
- Age Requirement: Homeowners must be 62 or older and have a certain amount of equity in their home to qualify.
- Primary Residence: The property must be your primary residence.
- Homeownership Status: To qualify for a reverse mortgage, you must own your home outright or have a significant amount of home equity. If you still have a substantial traditional mortgage balance, you may not be eligible.
- Condition of the Home: The home must meet certain standards for habitability. If the property is in poor condition or requires significant repairs, it may impact eligibility.
- Qualifying and Credit Standards: While a reverse mortgage doesn't require monthly mortgage payments, lenders may assess your financial stability based on income and credit history. Poor credit or insufficient income may affect eligibility or the terms of the loan.
- Federal Debt and Counseling Requirement: You must not be delinquent on any federal debt, and you must participate in an information class by a HUD approved counselor.
- Intent to Move: If you plan to move out of your home soon, a reverse mortgage may not be suitable. Reverse mortgages are designed for individuals who intend to stay in their homes for the long term.
Typical Disqualifying Considerations?
- {'No Monthly Mortgage Payments': "Unlike traditional mortgages, with a reverse mortgage, borrowers typically don't make monthly mortgage payments. Instead, the loan is repaid when the homeowner sells the home, moves out of the home, or passes away."}
- Tax Free and No Impact on Social Security or Medicare: The funds received from a reverse mortgage are tax free and generally do not affect Social Security or Medicare benefits, as they are considered loan advances rather than income.
- Supplemental Income: With a reverse mortgage loan, the lender makes regular payments to the homeowner. This can be especially beneficial for those who have limited income and want to enhance their financial resources.
- Stay in Your Home: Reverse mortgages can help seniors remain in their homes while accessing cash. This is particularly valuable for individuals who want to age in place and may need funds for healthcare expenses or home renovations.
- Flexible Payment Options: Borrowers can choose to receive funds from a reverse mortgage in various ways, such as a lump sum, monthly payments, or a line of credit. This flexibility allows homeowners to customize the arrangement based on their financial needs.
- No Risk of Loan Balance Exceeding Home Value: The repayment amount of a reverse mortgage is capped at the home's value, even if the outstanding loan balance surpasses this value. This means that the homeowner or their heirs won't be responsible for paying more than the home is worth.
Alternative Programs
