Reverse Mortgage Loan
A reverse mortgage loan could be a solution to turn a portion of your home’s equity into cash for various expenses if you are over 62 and looking for ways to finance your retirement. Additionally, if you have a traditional mortgage, a reverse mortgage could potentially eliminate your monthly mortgage payment.
Understanding Reverse Mortgage Loans
A reverse mortgage is a mortgage loan exclusively available to borrowers aged 62 years or older who have considerable equity in their homes. This loan enables them to convert a portion of that equity into cash that can be used to supplement their retirement income. Typically, the money received from a reverse mortgage loan is tax-free. Reverse loans are also known as Home Equity Conversion Mortgages (HECMs), and only FHA-approved lenders like us offer this type of government-insured loan.
Features:
- Available to borrowers aged 62 years or older who own their home outright or have significant equity in their home.
- Can be used to turn a portion of the equity in the home into cash for retirement, which can be used for many different purposes.
- The money received from a reverse mortgage loan is usually tax-free.
- The loan does not need to be repaid until the borrower(s) no longer live in the home as their primary residence.
- Eliminates the monthly mortgage payment for those who currently have a forward mortgage.
- Available in the form of a Home Equity Conversion Mortgage (HECM), which is insured by the U.S. Government’s Federal Housing Administration (FHA) and is only available through FHA-approved lenders.
Frequently Asked Questions
What are the potential advantages of a reverse mortgage loan?
- You can receive money from the equity you have in your home, and it is usually tax-free.
- You can receive these loan proceeds in a lump sum, in a line of credit, in a monthly cash flow payment, or in a combination of these three options.
- You may be able to eliminate your monthly mortgage payment.
- You will never owe more than what your home is worth when your loan matures and your home is sold.
- You may be able to bridge the Medicare gap from age 62 to 65.
- You may be able to pay for long-term care expenses.
Who is eligible for a reverse mortgage?
- Borrower(s) must be 62 years or older.
- Must be a homeowner and either own the home outright or have significant equity.
- Must live in the home as a primary residence (more than six months out of the year).
- Property must be a single-family home, a 2- to 4-unit dwelling or an FHA-approved condo.
- Must meet minimal credit and property requirements.
- Must receive reverse mortgage counseling from a HUD-approved counseling agency.
- Must not be delinquent on any federal debt.
How much home equity is needed for a reverse mortgage loan?
The specific percentage varies by lender and the type of reverse mortgage, but the general rule of thumb is to have at least 50% equity in your home.
Can you refinance your home loan if there is a reverse mortgage loan in place?
Reverse mortgage refinancing is an option that makes sense in certain situations. It may have been several years since you closed, and rates may have lowered, or it may make sense to switch from an adjustable rate to a fixed rate through a refinance. Perhaps your home has appreciated in value, and you have additional equity you’d like to tap into. Refinancing may increase the amount of money you are eligible to receive.
Can you sell the home if there is a reverse mortgage loan in place?
Yes. You can sell a house with a reverse mortgage already in place. However, keep in mind that when you sell the home, your reverse mortgage comes due, and you will need to pay off the reverse mortgage loan balance, plus interest and fees, at the time of the sale.
These are just a few common questions and answers about Reverse Mortgage loans. If you have more specific questions, it’s always best to consult with your Globus Capital advisor who can guide you through the process.
*The appraised value of the property may influence the loan amount.
**Generally, cash from equity is tax-free. However, this information should not be considered as tax or financial planning advice. Consult a tax advisor for tax-related advice and a financial planner for guidance on improving your retirement plans. Emortgage capital is not associated with any government agencies. The materials presented here are not from HUD or FHA and have not been approved by HUD or a government agency. To be eligible for a reverse mortgage, borrowers must obtain a certificate by attending counseling sessions with a HUD-approved agency. The borrower must be at least 62 years old. Loan proceeds are not considered income and will not impact Social Security or Medicare benefits. However, your monthly reverse mortgage advances may affect your eligibility for certain other programs. Consult a local program office or an attorney to determine how, or if, monthly reverse mortgage payments could affect your specific situation. At the end of the reverse mortgage loan contract term, you may no longer own some or all of the equity in the property subject to the reverse mortgage, and you might need to sell or transfer the property to repay the reverse mortgage proceeds with interest from your assets. We will charge fees for origination, mortgage insurance, closing costs, or servicing for the reverse mortgage, which we will add to the loan balance. The reverse mortgage loan balance grows over time, and interest will be charged on the outstanding loan balance. You retain the title to the property subject to the reverse mortgage until you sell or transfer it, and you are responsible for paying property taxes, insurance, and maintenance. Failure to pay these amounts may cause the reverse mortgage loan to become due immediately. Interest on a reverse mortgage is not deductible on your income tax return until you repay all or part of the loan.
Craig Kaminski
NMLS #: 1417248
licensed by:
E Mortgage Capital, Inc. d/b/a E Mortgage Capital,
NMLS# 1416824
(www.nmlsconsumeracces.org)
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