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What is a Reverse Mortgage
A reverse mortgage is a unique home loan specially created by the U.S. government for homeowners 62 years and older. In essence, it allows your house to pay you. You can convert a portion of the equity in your home into cash. There is no trickery, no gimmicks or misleading information. The equity you've built up over the years through home mortgage payments can be paid back to you to use as needed in your retirement years. One of the main reasons to consider a reverse mortgage is that it can help you maintain your financial independence, thereby reducing or eliminating any financial burden on your loved ones. This program allows your home to be your nest egg and cash cow.
What's the difference between a reverse mortgage and a bank home equity loan?
With a traditional second mortgage or a home equity line of credit, you must have sufficient income versus your debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income or credit score. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home. Generally, the more valuable your home is and the older you are, the more you can borrow. You don't make any monthly payments because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities, you cannot lose your home to foreclosure because you "missed mortgage payments".
Can the lender take my home away if I outlive the loan?
No. You do not need to repay the loan as long as at least one of the borrowers on title continues to live in the house and keeps the taxes, insurance, and maintenance current. You can never owe more than your home's fair market value.
Can I apply for a reverse mortgage if I have an exisitng mortgage on my home?
Yes. Your home does not have to be owned free and clear. However, the funds from the reverse mortgage must be sufficient to pay off any existing mortgage debt. If the reverse mortgage funds are not sufficient, the borrower must pay the shortage. There are cases where this is still a smart financial decision.
Can I repay the loan early?
Yes. There is no pre-payment penalty. You can even pay down on your balance as you want to maintain more home equity in the long run.
Do I retain ownership of my home?
Yes. Your name remains on the title just as it is now.
Does a reverse mortgage affect my Social Security benefits?
A reverse mortgage will not affect your regular Social Security benefits. Depending on your situation, it may affect benefits from the SSI program or Georgia Medicaid program. Consult your housing counselor for any questions you have.
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