About Reverse Mortgages
Who is a Reverse Mortgage Designed For?
Reverse mortgages are designed for homeowners at least 62 years of age with moderate to significant equity in their homes who want to eliminate their mortgage payment and/or receive additional cash.
What Art the Limits to How I Can Spend the Proceeds?
You can use the money you receive from your reverse mortgage any way you would like, everything from medical bills, to credit card debt to remodeling your home. There are no limits to how you can use your proceeds.
What If There Is Already a Mortgage on My Home?
Any existing mortgages will be paid off at closing. Then you’re free to enjoy the financial freedom that comes along with eliminating your mortgage payment. You are still responsible for maintaining the property, paying property taxes and insurance.
Do My Spouse and I Both Have To Be 62 Years or Older?
Not necessarily. Consult your financial advisor to get a full understand about your options.
What Types of Homes Do Not Qualify for a Reverse Mortgage?
Vacation homes or other secondary residences, and rental properties of more than four units do not qualify.
What Tax Liablity Will I Have for a Reverse Mortgage?
Currently the IRS treats monies received from a reverse mortgage to be loan advances and not taxable income. We recommend a tax advisor for specific questions.
What About a Home in a Living Trust?
A homeowner who has put the home in a living trust can usually take out a reverse mortgage, subject to review of the trust documents.
Will the Money from a Reverse Mortgage Affect Social Security, Medicare or Pension Benefits?
The proceeds from a Reverse Mortgage do not affect these benefits. It can affect Medicaid and Supplemental Security Income. We recommend that you consult your financial advisor.
Can the Interest Charged on My Loan Principal be Tax Deductable?
Interest is not deductible until you pay the reverse mortgage. You should consult a tax advisor for detailed tax advice.
What Is Due When the Loan is Repaid?
The borrower will pay back the cash advances they have received plus accumulated interest and any upfront costs that were financed initially will also be added to the loan balance.
Will I Ever Owe More Than My Home is Worth?
All reverse mortgages are “non-recourse” loans which means that the original borrower (s) will never owe more than the home is worth, regardless of the loan balance. Once the last owner(s) passes away or moves out of the home permanently, the heirs can sell the property and pay off the existing mortgage balance or they can refinance the property. If the heirs choose to keep the property, they will have to refinance the entire amount of the existing mortgage balance regardless of home’s appraised value. Heirs can buy the property for less, up to 95% of the current appraised value of the home.
If There Are No Payment, What Are My Responsibilities?
You are required to pay your property taxes, keep current the property insurance in place, maintain the home and notify the lender if you will be away from the property for an extended period of time.
When Does the Reverse Mortgage Loan Become Due and Payable?
The loan is due and payable when the last remaining borrower sells the property, permanently leaves the home, or passes away. Until these events take place you live in the home and make no payments to the lender. You are still responsible for maintaining the property, paying property taxes and insurance.