What is a Reverse Mortgage?

Facts About Reverse Mortgages

Facts About Reverse Mortgages

A reverse mortgage is very similar to a home equity loan, meaning that you are borrowing money based on the equity in your home expect for the fact that with a home equity loan you have to start making payments on the loan immediately after getting approved for a home equity loan.

When a senior takes out a reverse mortgage, in most cases, there is no loan payments that need to be made so long as you remain in your home. When you take out a reverse mortgage you cannot take out any other loans or have liens against the house.

So if you don’t want to make loan payments then a reverse mortgage maybe the best option for you however you need to understand that even though you get to stay in your home, the reverse mortgage lender becomes the home owner and takes possession of your home when you pass away.

With a reverse mortgage there is a maturity date on the loan which could mean you may have to move out if the amount of the loan starts to exceed the value of your property. Usually the reverse mortgage loan is due when you, the owner of the home, moves out for 12 consecutive months or when you pass away. (Note: Before you sign on for a reverse mortgage you would be wise to consult with a trusted lawyer)

A reverse mortgage is intended for senior citizens that have a very low monthly income however even though you have a low monthly income the value of the investment you made in your home has made you house rich yet you are cash poor. If you have low income but your home is worth a lot of money and you want to enjoy your golden years then a reverse mortgage could be the best option for you to enjoy the rest of your life to it’s fullest.

Pros & Cons of Reverse Mortgages

Pros of a Reverse Mortgage

  • No monthly payments required
  • Get a large lump sum of cash in your bank account
  • Or choose to get monthly payments made to you
  • Also you can choose to get a line of credit
  • Receive money to be comfortable in your retirement

    Cons of a Reverse Mortgage

    The cons of getting a reverse mortgage are the fees involved with getting a reverse mortgage loan. The fact is any type of loan you apply for there are going to be fees and costs involved in getting your loan. Here are some of the costs you need to take into account when you are considering getting a reverse mortgage loan on your home:

  • Interest rates on the loan
  • Loan origination fees
  • Mortgage insurance fee
  • Home appraisal fee
  • Title insurance fees
  • Plus there could be other closing costs on the loan
  • If you move out, you may have to pay the entire loan right away
  • There will be less money to leave to your heirs

  • Summary – Facts & Fiction About Reverse Mortgages

    Fiction: The company lending you the loan take the title to your home right away.
    Fact: You still own your home and get to live there. A reverse mortgage is just a lien put on your home.

    Fiction: The reverse mortgage loan can exceed the value of your home leaving your loved ones with a huge debt when you pass away.
    Fact: This is a non-recourse loan which means your loved ones will never owe more than the value of your home. The amount owing will come from your estate.

    Fiction: You will get kicked out of your house with a reverse mortgage
    Fact: You stay in your house for as long as you want and no one will ever kick you out of your home. A reverse mortgage matures only at the time the home is no longer your primary residence.