ENJOY EXTRA INCOME.  A reverse mortgage is a special type of loan made to older homeowners to enable them to convert the equity in their home to cash to finance living expenses, home improvements, in-home health care, or other needs.

THE MORTGAGE THAT PAYS YOU.  With a reverse mortgage, the payment stream is "reversed." That is, payments are made by the lender to the borrower, rather than monthly repayments by the borrower to the lender, as occurs with a regular home purchase mortgage.

PAY FOR ALMOST ANYTHING.  You can borrow the money for:

• Home maintenance and upgrades
• Hospital bills and other healthcare costs
• Prescription drugs
• Living assistance
• Tax payments
• Payoff debt, including credit cards
• A second home or a boat
• A new car or repairs for your current car
• A college education - for you, your children, or your grandchildren
• Travel
• Gifts
• Day-to-day living expenses

A reverse mortgage is different from a home equity loan or line of credit, which many banks and thrifts offer. With a home equity loan or line of credit, an applicant must meet certain income and credit requirements, begin monthly repayments immediately, and the home can have an existing first mortgage on it. In addition, there is no restriction on the age of borrowers.

HOW DO YOU QUALIFY.  In general, reverse mortgages are limited to borrowers 62 years or older.  Their is no income qualification.  The size of the reverse mortgage you qualify foand the benefits you receive will depend on your age, the appraised value of your home, the type of reverse mortgage you want and the current interest rate.      

Borrowers usually have a choice of receiving the proceeds from a reverse mortgage in the form of a lump-sum payment, fixed monthly payments for life, or line of credit. Some types of reverse mortgages also allow fixed monthly payments for a finite time period, or a combination of monthly payments and line of credit. The interest rate charged on a reverse mortgage is usually an adjustable rate that changes monthly or yearly. However, the size of monthly payments received by the senior doesn't change.

WHAT ARE THE BENEFITS.  With a reverse mortgage:

• You can continue living independently in your home and retain full title to your property
• There are no monthly mortgage payments
• The interest is tax deductible
• Equity release is tax free
• No income qualification
• The lender has no claim on your income or assets except the value of your home
• Repayment is not due until the house is sold or you permanently move out or pass away
• Social Security benefits and Medicare are usually not affected - check with the appropriate government agencies

HOW DOES IT WORK.  Unlike a home purchase mortgage or home equity loan, a reverse mortgage doesn't require monthly repayments by the borrower to the lender.  A reverse mortgage isn't repayable until the borrower no longer occupies the home as his or her principal residence.

This can occur if the sole remaining borrower dies, the borrower sells the home, or the borrower moves out of the home, say, to a nursing home.

The repayment obligation for a reverse mortgage is equal to the principal balance of the loan, plus accrued interest, plus any finance charges paid for through the mortgage. This repayment obligation, however, can't exceed the value of the home.

The loan may be repaid by the borrower or by the borrower's family or estate, with or without a sale of the home. If the home is sold and the sale proceeds exceed the repayment obligation, the excess funds go to the borrower or borrower's estate. If the sales proceeds are less than the amount owed, the shortfall is usually covered by insurance or some other party and is not the responsibility of the borrower or borrower's estate. In general, the repayment obligation of the borrower or borrower's estate can't exceed the value of the property.

In general, a borrower can't be forced to sell their home to repay a reverse mortgage as long as they occupy the home, even if the total of the monthly payments to the borrower exceeds the value of the home.

WHO CAN I TALK WITH.  Call Rob Rosa at 860 558 2122 or email him at robrosa@sbcglobal.net for help to determine whether a reverse mortgage is a smart choice for you, as well as which one will best fit your needs.  We can also help with completing the application for you.  And, we will schedule a counseling session with an approved counselor to make sure you fully understand the mortgage requirements and benefits.