Substantive: a financial agreement in which a homeowner transfers the equity of his home in exchange for regular payments, usually to supplement retirement income. Unlike traditional mortgages, which decrease as you repay the loan, reverse mortgages increase over time as interest on the loan accumulates. A reverse mortgage loan, such as a traditional mortgage, allows homeowners to borrow money using their home as collateral for the loan. As with a traditional mortgage, when you apply for a reverse mortgage loan, the title to your home remains in your name.
However, unlike a traditional mortgage, with a reverse mortgage loan, borrowers don't make monthly mortgage payments. The loan is repaid when the borrower no longer lives in the home. Interest and charges are added to the loan balance each month and the balance increases. With a reverse mortgage loan, homeowners must pay property taxes and homeowners insurance, use the property as their primary residence, and keep their home in good condition.
A reverse mortgage is a special type of mortgage loan only for homeowners who are 62 or older. Watch this two-minute video to see how they work and what you need to consider before you apply. With a reverse mortgage, the amount owed by the homeowner increases, not decreases, over time. When you have a regular mortgage, you pay the lender every month to buy your home over time.
In a reverse mortgage, you get a loan where the lender pays you. Reverse mortgages are part of the equity in your home and convert it into payments to you, a kind of prepayment of the equity in your home. The money you receive is usually tax-free. You usually don't have to pay back the money while you live at home.
When you die, sell your home or move out, you, your spouse or your estate would repay the loan. Sometimes, that means selling the house to get money to pay off the loan. A reverse mortgage is a type of loan that allows people age 62 or older to borrow against a portion of the equity in their home. Unlike a traditional mortgage, instead of making monthly mortgage payments to the lender, the borrower receives money from the lender.
A reverse mortgage is a loan that allows homeowners aged 62 or older to convert a portion of the home's equity into cash. This type of loan is especially attractive to people who want, or need, to supplement their retirement funds. A reverse mortgage is a loan that allows you to take out a loan against the equity of your home, tax-free. Unlike a traditional mortgage, where you make monthly payments to repay your loan, with a reverse mortgage loan, you are the one who receives payments from the lender.
While you no longer have to make monthly mortgage payments, you are still responsible for paying your property taxes and homeowners insurance and must continue to maintain your home. A reverse mortgage is a type of loan that allows homeowners aged 62 or older, who have usually paid off their mortgage, to borrow part of their home equity as tax-free income. You should explain how a reverse mortgage might affect your eligibility for Medicaid and Supplemental Security Income (SSI). Home improvement costs include not only the price of the work being done, but also the costs and charges you will pay to get the reverse mortgage.
A reverse mortgage presents a way for older homeowners to supplement their income in retirement or pay for home renovations or other expenses, such as health care costs. Also, while not all reverse mortgage lenders use high-pressure selling tactics, some do use them to attract borrowers. A borrower can choose between different refinance options, but should only refinance their reverse mortgage if this helps financially. Reverse mortgage borrowers also need to keep up with property taxes and homeowners insurance.
If you die and your heirs want to keep the house, they can refinance with a traditional mortgage, buy it for the amount owed on the reverse mortgage or 95% of the appraised value, whichever is lower. An HECM reverse mortgage is the most common type, obtained through lenders approved by the Federal Housing Administration (FHA). While these loans may be the easiest to obtain and the quickest to finance, they are also known to attract unscrupulous professionals who use reverse mortgages as an opportunity to scam unsuspecting seniors out of their home equity. Reverse property mortgages are not federally insured, so borrowers are not required to pay a monthly insurance premium or receive financial advice.
Keep in mind that the interest rate for reverse mortgages tends to be higher, which can also increase your costs. Even when a reverse mortgage is issued by the most reputable lenders, it is still a complicated product. When you finally sell your home, the money from the sale will go toward paying your existing reverse mortgage plus interest. A reverse mortgage can deplete the equity in your home, meaning fewer assets for you and your heirs.
While there are some cases where reverse mortgages can be useful, there are many reasons to avoid them. . .