Reverse mortgages are designed to allow older homeowners to access the equity in their home. Monthly loan payments are optional because the loan is repaid when the borrower sells the home, moves out permanently or passes away. Any remaining equity after the loan is settled goes to the borrower or their heirs.
To be eligible for a reverse mortgage, you must meet certain requirements.
- You must be 62 years or older for a federally insured Home Equity Conversion Mortgage or 55 years old for a proprietary loan (varies by state and product).
- Live in the home as your primary residence
- Have a substantial amount of equity in the home
- Have sufficient financial resources to stay current on property taxes, homeowners insurance and maintenance.
- Complete a counseling session with a HUD approved agency for a HECM
The most common reverse mortgage is a refinance. It allows you to convert part of the equity in your primary residence into a tax-free (talk to your tax advisor about this) cash – without selling your home or making monthly payments. But you must cover taxes, insurance and maintenance. The lender will pay you in one of several disbursement options, such as a lump sum, line of credit or monthly payment.
The second type of reverse mortgage is a purchase. It allows you to buy a new primary residence by combining a one-time down payment with reverse mortgage loan proceeds in one transaction. This is ideal for someone relocating or downsizing.
For those that are considering this, please reach out and I can get you more answers. This can help those that need some extra money every month and have equity in their home.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
