Reverse Mortgage
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What is a reverse mortgage?
A reverse mortgage is a loan against your home that enables you to convert a portion of your home’s equity in tax-free income. The loan does not come due for as long as you live in your home. Moreover, it does not come due until the last borrower leaves the home.
Simply put, a reverse mortgage is a loan that you don’t have to repay until you no longer live in your home.
I'm still unclear, can you explain?
The lender makes the loan based on your age, the amount of equity in the home, your location, interest rates, and the type of reverse mortgage you get. The money gets paid back with interest when the last borrower dies, permanently moves out of the house, or sells the house. It is quite often the proceeds from the sale of the house which satisfy the loan obligation.
Who can get a reverse mortgage?
First, you must be 62 years of age or older. Second, the home must be your residence. In addition, it is the borrower’s responsibility to get the taxes paid and insurance in force.Lastly, the home must be in reasonable conditions and compliant with HUD housing standards
What if my home isn’t paid off, can I still get a reverse mortgage?
The debt must be satisfied either before you get the reverse mortgage, or, more likely, you can satisfy the existing debt with the proceeds of the reverse mortgage. Yes, the reverse mortgage can be used to pay off any remaining debt you currently have.
How can I use the money from the reverse mortgage?
You may use the money how you choose. You can pay current debts, make repairs or improvements to your home, pay for healthcare expenses, etc.
How is this different from a home equity loan?
Unlike a home equity loan, with a reverse mortgage there are no monthly payments, AND no income or credit score requirements.
Does the lender own the house?
This is a common myth. You continue to own your home, and the lender places a mortgage lien against the property just like a bank would place a 30yr fixed mortgage lien.
Can my home ever be taken away from me?
Your home cannot be taken from you even if you live longer than the loan. You can also never owe more than the home is worth.
Can I still pass the house on to my heirs?
YES! You may pass the house on to heirs if the loan has been paid off or refinanced.
Does it cost anything out-of-pocket to get a reverse mortgage?
These costs are generally limited to a minimal application fee and an inexpensive credit check. These fees vary, so it is best to ask!
What kinds of reverse mortgages are there?
The most common kind of reverse mortgage is a federally insured reverse mortgage. It is called a Home Equity Conversion Mortgage (HECM). These loans are insured by the U.S. Department of Housing and Urban Development (HUD).
There are other kinds of reverse mortgages including government sponsored reverse mortgages and proprietary reverse mortgages. It is best to ask loan specialists personally about the different kinds of reverse mortgages.
How do I access the money?
The different ways to receive the money from a reverse mortgage are:
- You can get the money all at once as a lump sum.
- You can receive monthly payments.
- You can take the money as needed.
- You may choose a combination of any of the above.
Wait, will my benefits be cut if I get a reverse mortgage?
Good question: A reverse mortgage does not affect your Social Security, Medicare, or pension benefits. However, SSDI and Medicaid can be a different story. It is generally possible to structure the loan in a way that your benefits remain intact. It is an important question to ask your loan originator. In addition, before the loan is issued, you will meet briefly with an unbiased, government approved counselor.
Where do I go from here?
You need to be armed with all the facts before undertaking a reverse mortgage. Call Truckee Funding today at 530-550-1520 to speak with a mortgage specialist.
What should I do to prepare to speak with a reverse mortgage specialist?
Know some basic information. Be ready to provide address, county, current mortgage information, and a very rough estimate of the value of your house.
Be ready to ask questions.
What else do you need to know?
Ask the lender about his/her organization.
- Does the lender specialize in reverse mortgages?
- What fees are charged?
- Is the lender part of an organization such as the National Reverse Mortgage Lenders Association?
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