What Exactly is a Reverse Mortgage?

A reverse mortgage is a loan provided for seniors at the age of 62 years or older or it it enables the borrowers to convert part of their home equity into tax-free income.

Income that they can do what ever they would like with. They can receive this income or rather the loan without having to pay taxes on it, or having to sell their home. In fact they don’t even have to make monthly payments. The loan is only due when the last borrower permanently leaves the home, either by choice or by death.

Before getting too excited it is important to note that not all types of loans are available in all states. So you will need to check with your local financial advisor or qualified reverse mortgage counselor to know if this type of loan is offered in your state.

What are the Advantages of a Reverse Mortgage?

There are many advantages to obtaining a reverse mortgage loan. To start, you never have to pay the loan back for as long as you live and are living in the home. So from the time that you are age 62 until you either willingly leave the home or die, you never have to make a single mortgage payment. Isn’t that wonderful?

It is very rare to ever be able to receive any type of income and not have to pay taxes on it. However, with a reverse mortgage you never pay taxes on the loan. It’s the closest you can get to receiving free money, at least that I can think of.

There is no limit to what you can do with the money received in a reverse mortgage loan. You could buy 2 million snicker bars if you like, and the bank could care less. It is totally up to you, use the money any way you like.

Depending on the value of your home it is possible to receive as much as 417,000 (you will need to check on that figure regarding your area) if you have enough equity in your home. This money could simply be supplemental to your current Social Security income. Allowing you to live more comfortably from month a month by drawing upon this money as you need it.

In any case the money is yours to keep and to do with what you want with it.

It is wise to always consult with a tax adviser in any case.

What are the Income Qualifications?

One of the more personal questions that all of us have to deal with when trying to get any type of loan is regarding our financial income status. How much money we make or how much money we have coming in on a monthly or yearly basis. This is one of the wonderful things about a reverse mortgage. Due to the fact that the borrowers do not ever have to make any monthly payments on a reverse mortgage loan there is no need to know their financial income status. You could be totally broke or even in debt, and it would not make any difference regarding your qualifying for this type of loan.

On a side note, you will have to pay yearly property taxes as well as homeowners insurance.

Who Owns the Home?

Some people have been misled to believe that once they receive a brief first mortgage loan they are no longer the title honors. That is not true. The homeowners always retain the title. However, they will be responsible for maintaining the home in reasonable condition. It must be maintained at all times.

What About Reverse Mortgage Refinancing as in Option?

If your home increases in value, where the interest rate drops dramatically, or perhaps even the maximum lending limit of a reverse mortgage increases, you cannot any time refinance. That is totally up to you. As always it is a good idea to talk to a reverse mortgage counselor or financial adviser to look at the pros and cons of refinancing your home. Remember, you’ll never be making monthly payments on a reverse mortgage loan. However, if you do site to refinance your home, and it is not a refinance of a reverse mortgage type loan, then you will have to start making the typical monthly mortgage loan payments.

What is the Term of the Loan?

A typical loan these days is about 30 years. However, when it comes to the reverse mortgage loan there is no year limit. If you happen to be one of those wonderful long living people and vanished to live to be 110, then good for you. You will at no time ever have to make payments on your loan or repay the loan entirely due to outliving the loan. Simply because a reverse mortgage does not have any set time period for repayment. It is for as long as you live, or at least until you leave the home.

What About Leaving My Home to My Heirs?

Once the last borrower leaves the home, and what ever manner that might be, the loan must be repaid. This will include interest that has accrued during the loan time period, monthly service fees, and any other costs that were included within the loan. This would be a good question to go over with your reverse mortgage counselor so that you understand all the types of fees interest and so forth that can accumulate over time on your loan.

The interest and the fees of course are nothing for you to worry about, but if you are concerned about it regarding the inheritance, make sure you understand what these things are at the time of your consultation with your reverse mortgage loan counselor.