Reverse loans permit homeowners 62 years of age or older to borrow against the equity in their home. Instead of the borrower making monthly payments to the lender, the lender makes payments to the borrower. The borrower is not required to make any monthly payments on the loan, but they are responsible for paying property taxes, insurance, any association dues, and maintaining the home.
Reverse mortgages are a popular option for seniors who want to stay in their homes but need additional financial support. They can use the money from the reverse mortgage for any purpose, such as paying for healthcare expenses, home improvements, or daily living expenses.
In general, when does a reverse loan make sense?
- You intend to stay put for a while and don’t plan to move.
- You can afford home upkeep and property taxes and insurance.
- You want to access home equity to supplement retirement income.
What are the benefits of a reverse loan?
- With a reverse mortgage, you do not have to make monthly mortgage payments; instead, the loan becomes due when you sell your home or no longer occupy it as your primary residence.
- A reverse mortgage allows you to access the equity in your home without having to sell it or take out a traditional mortgage. This can be a useful way to supplement income.
- Reverse mortgages may be a good option for seniors with less-than-perfect credit or limited income.
- Reverse mortgages offer several payout options, including a lump sum, a line of credit, or monthly payments. This allows you to choose the option that best fits your financial needs.
- Money received from a reverse mortgage is not subject to income tax.
To qualify for a reverse loan, an applicant:
- Must be 62 or older, depending on the state*
- Have substantial equity in their home
- Must be able to cover ongoing costs associated with owning a home, such as taxes, insurance, and homeowner’s association fees
- Must be able to keep up with property maintenance
- Must receive third-party HECM counseling
How can I receive my funds?
You may choose to receive the reverse mortgage funds in a lump sum, monthly advances, as a line of credit, or a combination of the three, depending on the reverse mortgage type. The amount of money you are eligible to borrow depends on the age of the youngest eligible borrower or eligible non-borrowing spouse, current interest rates, and your home’s appraised value.
*see your reverse mortgage professional for requirements.