Should I consider a Reverse Mortgage?
Home Equity Conversion Mortgages, more commonly known as Reverse Mortgages, offer a unique financial freedom for those 62 and older. It’s a way to leverage your home’s equity, freeing up and supplementing your monthly cash flow. Think of it as a liberating alternative to a home equity loan or line of credit. With these loans, the borrower must immediately begin paying the lender when funds are accessed. With a Revere Mortgage, you can convert some of your home equity into liquidity; borrowers are not required to sell the home, give up the title, or take on a new monthly mortgage payment. The loan balance plus any accrued interest does not have to be repaid to the lender until a maturity event occurs.
Reverse Mortgages have been around for decades, yet there are many misconceptions that remain. One of the most prevalent is the belief that the home must be debt-free before a client can qualify. The truth is the borrower can have an existing mortgage; however, the lien must be able to be paid off prior to or by using the funds from the Reverse Mortgage at the time of closing. In fact, this is a popular use of the Reverse Mortgage. Another misconception is the bank owns the home. The truth is the borrower is never asked to exchange the title of their home to secure the Reverse Mortgage. Just as on a regular mortgage or home equity loan, the lender will place a lien on the home until the funds are repaid. Another misnomer is that the borrower’s heirs incur any outstanding mortgage debt. Heirs are never responsible for repaying the debt. Many safeguards are built into the FHA Reverse Mortgage that protects the borrower and non-borrowing spouse, providing a sense of security. FHA has implemented protections for the non-borrowing spouse to allow them to remain in the home after the borrower passes away. As with any mortgage, the borrower must maintain the property’s obligations, such as homeowner’s insurance, property taxes, homeowner’s association fees, and essential home maintenance through the loan term.
Reverse Mortgages are incredibly flexible in terms of accessing the funds. The borrower can opt for a lump sum payout, receive monthly payments, or combine both, giving you control over your financial strategy. Your Reverse Mortgage Specialist will guide you through these decisions based on your financial goals. There are no restrictions on how the borrower uses the funds. The funds may be used to ensure the borrower can age in place, pay off debt, or travel. It is entirely up to the borrower and their goals, giving you the power to shape your financial future.
Eligibility is pretty straightforward. The borrower must be 62 or older and a U.S. citizen or lawful permanent resident. They must occupy the property as their primary residence, receive counseling, and be able to and willing to maintain the property obligations, such as homeowner’s insurance, property taxes, and HOA fees if applicable, and basic home maintenance through the term of the loan. Reverse Mortgages require a financial assessment to evaluate whether a borrower qualifies and under what conditions. The evaluation determines the borrower’s ability and willingness to meet financial obligations. While a credit score is a primary factor for regular mortgages and home equity loans, Reverse Mortgages are less centered on the score and place emphasis on the willingness component of the borrower, which includes credit history and property payment history.
If you are interested in learning more about Reverse Mortgages and seeing if this is a good option for you, reach out to our Reverse Mortgage Specialist today for a free, no-obligation consultation. Our passion is helping our older clients optimize their home equity to meet their needs and goals.
Mona Ballard | Residential and Reverse Mortgage Specialist, NMLS 2078076
